HOW DOES INTERNAL CAPABILITY INFLUENCE COMPANIES’ FINANCIAL PERFORMANCE DURING COVID-19?

Abstract

One of the adverse impacts of the Covid-19 pandemic outbreak is a disruption in business activities and the financial performance of business players that have become an issue of great interest. The ability of the companies to manage their resources efficiently and effectively is regarded as one of the prominent companies' performances determinants. Hence, this study aims to investigate how the companies' internal capabilities influence their financial performance during the Covid-19 period. Applying a resource-based view, this study is based on six-quarter observations of Malaysian public listed companies from year 2020 to 2021 during the pandemic outbreak period. This study used return on assets and equity as a proxy of financial performance while tangibility, leverage, and liquidity ratios were used as companies' internal capacities. The empirical evidence was conducted using multivariate regression models for balanced panel data analysed using a machine learning approach, Python Pandas Programming Language. The results of this study supported the resource-based view that internal capabilities will assist companies in facing the uncertain Covid-19 period and boost the companies' financial performance. This study provides evidence that liquidity ratio has a positive statistical impact on companies' performance, while tangibility ratio and leverage ratio have a negative relationship with companies' performance. This study is expected to contribute to the current debate on the determinant of financial performance and provide insight to companies and their stakeholders on how internal capabilities can enhance the companies' financial performance.