Abstract:

The Malaysian construction sector has been highlighted in the National Key Economic Area (NKEA) as one of the critical industries to make significant contribution in developing Malaysia to be a high income nation. However, the construction industry which is largely reflected with 3Ds jobs (dirty, dangerous and difficult) is also suffering from chronic financial 3Ds (distress, difficulties and debt) which affect the firms’ performance. Hence, this study attempts to examine the determinants of financial 3Ds from the perspective of Malaysian construction industry from the year 2001 to 2015. This study use the time interest earned to measure the financial 3Ds; debt to capital ratio to measure firm’s leverage; working capital to measure firm’s financial position; and sales index to measure size of the firm. The analysis is conducted using Panel Regression Fixed Effect Model for 67 listed construction firms in Malaysia. In summary, the result revealed that these three variables are found to be highly significant determinants in identifying financial distress among firms in Malaysian construction industry. The results of the study can be used as a benchmark to measure performance of the business. The ability of the company to trigger for financial distress may assist them in turnaround the performance before it is becoming too late. These three independent variables could act as basic tools and widely used by companies. It is suggested that, future studies can be conducted by incorporating more variables to reflect financial distress. Some control variables such as the macroeconomic variables could also be included to conduct more robust research that can reflect the actual determinants of financial 3Ds. It is also noted that, the study can also be extended to other type of industries such as plantations and manufacturing.