THE IMPACT OF FINANCIAL POLICY ON PROFITABILITY PERFORMANCE: EVIDENCE FROM DEVELOPING ECONOMICS

Abstract

The paper focuses on the impact of financial policies on profitability performance, either in the company or in the startup world in general. The sample used in this paper comprises 117 Malaysian companies from 2020-2025. The information used in this paper is secondary. The positive and significant relationship between financial policy and profitability performance in Malaysian companies is significant. This importance comes from the fact that financial policy represents one of the important tools for achieving economic stability and stimulating growth, which has a direct and indirect impact on the profits of companies. The approach used in the current research was descriptive analytical in reviewing the relevant literature and previous studies. The analysis of the relationship between financial indicators and profitability indicators depended on this basis. The effect of financial policy on profitability will come through consumer purchasing power and, consequently, the volume of demand for the products of companies, which in turn impacts profits. Furthermore, results from multiple linear regression analysis showed that fiscal policy instruments such as government spending and direct cash transfers tended to greatly affect profit margins relative to changes in tax among SMEs participating in the experiment. Checks for robustness have equally validated stability of results by controlling structural variables such as a business's manufacturing, service, or technology, and the project life cycle stage in periods of startup, growth, or maturity; thus, conclusions are further verified. Based on these findings, the recommendation is that fiscal policies be designed considering the nature of startups, such as flexibility in short-term fiscal stimulus and linking support to measurable financial performance indicators.