Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia

The purpose of this study is to examine the relationships of capital structure determinants against the leverage ratio and the capital structure approach adopted by all eight (8) domestic commercial banking institutions in Malaysia. Correlation analysis is deployed to analyse the data collected from...

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Main Author:	Noor Azwa, Idris
Format:	Thesis
Language:	eng eng
Published:	2016
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/6260/1/s815690_01.pdf https://etd.uum.edu.my/6260/2/s815690_02.pdf
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id	my-uum-etd.6260
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Zainuddin, Zaemah
topic	HG Finance
spellingShingle	HG Finance Noor Azwa, Idris Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia
description	The purpose of this study is to examine the relationships of capital structure determinants against the leverage ratio and the capital structure approach adopted by all eight (8) domestic commercial banking institutions in Malaysia. Correlation analysis is deployed to analyse the data collected from the financial statements of the domestic commercial banks in Malaysia as of January 2016. Seven variables, i.e. leverage, profitability, tangibility, size, growth, dividend and liquidity, are studied over a five-year period. Results show that the leverage ratio is in direct relationship with profitability, growth and liquidity, whilst in indirect relationship with tangibility, size and dividend payout. This concludes that highly profitable banks, banks with high potential growth and high liquidity prefer debt over equity capital while larger banks, banks with high tangible assets and higher dividend pay-out ratio prefer equity over debt capital. It is further observed that all banks under review relied more on debt rather than equity capital, with Malayan Banking Berhad, the largest domestic commercial bank in Malaysia maintain the lowest leverage ratio for the entire review period. The writer recommends that the stakeholders of commercial banking sector in Malaysia, i.e. investors, shareholders, bank’s management, lenders and policy makers, would have better understanding on the factors which may influence the capital structure of the domestic commercial banks in Malaysia, and take benefit from the findings observed in making informed decision to their interest and advantage and to enhance competitiveness in Malaysian banking sector.
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Noor Azwa, Idris
author_facet	Noor Azwa, Idris
author_sort	Noor Azwa, Idris
title	Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia
title_short	Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia
title_full	Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia
title_fullStr	Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia
title_full_unstemmed	Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia
title_sort	analyzing the relationships between capital structure and bank's specific factors: evidence from malaysia
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2016
url	https://etd.uum.edu.my/6260/1/s815690_01.pdf https://etd.uum.edu.my/6260/2/s815690_02.pdf
_version_	1776103684950720512
spelling	my-uum-etd.62602023-03-09T02:45:42Z Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia 2016 Noor Azwa, Idris Zainuddin, Zaemah Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance The purpose of this study is to examine the relationships of capital structure determinants against the leverage ratio and the capital structure approach adopted by all eight (8) domestic commercial banking institutions in Malaysia. Correlation analysis is deployed to analyse the data collected from the financial statements of the domestic commercial banks in Malaysia as of January 2016. Seven variables, i.e. leverage, profitability, tangibility, size, growth, dividend and liquidity, are studied over a five-year period. Results show that the leverage ratio is in direct relationship with profitability, growth and liquidity, whilst in indirect relationship with tangibility, size and dividend payout. This concludes that highly profitable banks, banks with high potential growth and high liquidity prefer debt over equity capital while larger banks, banks with high tangible assets and higher dividend pay-out ratio prefer equity over debt capital. It is further observed that all banks under review relied more on debt rather than equity capital, with Malayan Banking Berhad, the largest domestic commercial bank in Malaysia maintain the lowest leverage ratio for the entire review period. The writer recommends that the stakeholders of commercial banking sector in Malaysia, i.e. investors, shareholders, bank’s management, lenders and policy makers, would have better understanding on the factors which may influence the capital structure of the domestic commercial banks in Malaysia, and take benefit from the findings observed in making informed decision to their interest and advantage and to enhance competitiveness in Malaysian banking sector. 2016 Thesis https://etd.uum.edu.my/6260/ https://etd.uum.edu.my/6260/1/s815690_01.pdf text eng public https://etd.uum.edu.my/6260/2/s815690_02.pdf text eng public masters masters Universiti Utara Malaysia Abor, J. (2005). The Effect of Capital Structure on Profitability: Empirical Analysis of Listed Firms in Ghana. Journal of Risk Finance, 6 (5), 438–445. Admati, A., De Marzo, P., Hellwig, M., & Pfleiderer, P. (2010). Fallacies, irrelevant facts and myths in the discussion of capital regulation. 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Analyzing the relationships between capital structure and bank's specific factors: evidence from Malaysia

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