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Table 4. Diagnostic Tests for Static Model

P-values of the tests
VIF H SC Strategy
2.81 0.0000 0.6299 Random effects (within) regression model with
robust option
Notes: (1) VIF: variance inflation factors, (2) H: heteroskedasticity & (3) SC: serial correlation

Considering the various diagnostic tests that have been conducted and the remedial procedure
undertaken, this paper may say that there is enough evidence to conclude that the examined statistical
test satisfies the key assumptions of linear regression. As shown in Table 5, the regression result
2
suggests that the model fits the data well at the 0.05 significance level. The Adjusted R of 0.3624
suggests that the four independent variables explain 36.24% of the variance in the firm’s performance.
The results of the regression also suggest political connection is the only variable found to have a
significant relationship with firms’ performance. Liquidity ratios (current ratio and quick ratio) do not
appear to be significantly related to firms’ performance.

Table 5. Regression Results
Current Ratio 2.578(0.16)
Quick Ratio -1.3296(-0.77)
Asset turnover 5.6147(1.45)
Political Connection -6.4559*(-1.65)
Constant -13.9616*(-1.54)
N 95
r2_a 36.24
p 0.0000
chi2 19.6718
Notes (1) t statistics in parentheses, (2) * p < 0.1, ** p < 0.05, *** p < 0.01,

Conclusion
This paper has examined the determinants of firms’ performance for politically connected shariah-
compliant firms listed under the consumer products sector. Although this paper has provided us with
empirical evidence, several areas need to be improved with future empirical research. The inclusion of a
larger number of firms might lead to a new set of findings and conclusions. Second, this paper has not
taken into consideration the effect of using different data analysis techniques (such as GMM). Future
studies might want to explore the use of other techniques in analyzing the data.

References
Ang, J. S., Ding, D. K., & Thong, T. Y. (2013). Political connection and firm value. Asian Development Review,
30(2), 131–166. https://doi.org/10.1162/ADEV_a_00018

Chen, Y., Luo, D., & Li, W. (2014). Political connections, entry barriers, and firm performance. Chinese
Management Studies, 8(3), 473–486. https://doi.org/10.1108/CMS-08-2013-0148

Costanza, D. P., Blacksmith, N., Coats, M. R., Severt, J. B., & DeCostanza, A. H. (2016). The Effect of Adaptive
Organizational Culture on Long-Term Survival. Journal of Business and Psychology, 31(3), 361–381.
https://doi.org/10.1007/s10869-015-9420-y

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