Corporate debt structures: A study of Malaysian publicly listed firms
Over the past fifty years, most financial literatures have revolved around different theories that try to explain exactly what does matter in determining capital structure (Ryen et al., 1997). Precisely, how Malaysian companies make decisions on capital structure have not been explored? It will be i...
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| Format: | Thesis |
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2011
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| Summary: | Over the past fifty years, most financial literatures have revolved around different theories that try to explain exactly what does matter in determining capital structure (Ryen et al., 1997). Precisely, how Malaysian companies make decisions on capital structure have not been explored? It will be important to identify the factors for Malaysian companies to choose an appropriate capital structure to maximise their firm value as well as their stockholders’ wealth. How firms choose debt, equity and hybrid securities in their financial decisions are an intriguing decision. The fundamental question is whether the choice of capital structure in a firm will affect its value and how the proportions will increase shareholders’ wealth. The objective of this study is to investigate the determinants of corporate debt structures in the Malaysian publicly listed firms. It hopes to understand the Static Trade-off Theory, Pecking Order Theory as well as the Signalling Theory affecting the formation of capital structure in Malaysian companies. A randomly selected sample of 154 firms from Bursa Malaysia are analysed using a panel regression approach. The balance data of 1232 observations is studied during the period 2002-2009. Total debt is the dependent variable which is regressed by 8 other independent variables: growth opportunities, effective tax rate, interest coverage ratio, profitability, firm size, tangibility of assets, non-debt tax shield and volatility. These variables are selected based on capital studies throughout the world. Fixed effects and random effects are tested using Hausman Test to confirm the appropriate model for the Malaysian companies. |
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