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1. Introduction
One of the main goals of any company is to be sustainable in any competitive environment. To do so, it is important for the company to develop, implement and maintain strategies that can enhance its performance. This can be done by investigating the internal and external factors that may have an impact on the company’s profitability. The quality and efficiency of managers depend on their ability to identify those elements that can lead to increased profitability. In general, profitability is defined as the earnings of a company that are generated from revenue after deducting all expenses incurred during a given period. It is one of the most important factors that signal management’s success, shareholders’ satisfaction, attraction for investors and the company’s sustainability (Bekmezci, 2015). Undoubtedly, the ultimate goal of any firm is to maximize the wealth of its shareholders by increasing the value of its stocks. Previous studies have found a positive relationship between earnings and stock values (Kalama, 2013). In other words, if earnings announcements come as expected or are better, stock prices will increase, but if earnings announcements fall short of expectations, the stock prices will decline.
A majority of companies, if not all, realize the concept and the importance of profitability but they may not know how to enhance it and what the factors affecting profitability are. This is more obvious during a time of crisis; some companies attempt to preserve their financial status by undertaking risky measures, but due to limited experience and high risks, these kinds of actions more often than not result in worsening their financial status.
Identifying the factors which determine profitability is still one of the major concerns of researchers. A number of previous studies have investigated the factors that influence profitability of firms, including size (Stierwald, 2010a, b; Yazdanfar, 2013; Mohd Zaid et al., 2014); working capital (WC) management (Goddard et al., 2005; Chowdhury and Amin, 2007; Alipour, 2011; Charumathi, 2012); age of the firm (Geroski and Jacquemin, 1988; Bhayani, 2010; Agiomirgianakis et al., 2013); and leverage (Burja, 2011; Mistry, 2012; Boadi et al., 2013). However, previous studies have shown inconsistent findings that make generalization questionable. Based on this, this study is concerned with profitability in Malaysia. Malaysia is widely recognized...