This study examines the determinants of profitability among 44 firms selected from the top 100 Shariah-compliant companies listed on Bursa Malaysia. Using panel data regression analysis, profitability measured by gross margin is analyzed against five independent variables: liquidity (quick ratio), leverage (assets to equity), efficiency (inventory turnover), earnings power (earnings retention), and corporate governance (highest remuneration and board compensation). The Random Effects Generalized Least Squares model with robust options was used to analyze the data. The results reveal that efficiency has a positive influence on profitability, indicating that effective inventory management enhances firm performance. Conversely, corporate governance, represented by the highest remuneration, shows a significant negative relationship with gross margin. This outcome underscores the importance of fair and equitable compensation practices in accordance with Shariah principles. The study acknowledges limitations related to sample size, limited financial indicators, and reliance on historical data from 1993 to 2023, which may not capture recent market developments.
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