Suhaila, Mat Kila and Wan Mahmood, Wan Mansor (2008): Capital Structure and Firm Characteristics: Some Evidence from Malaysian Companies.
Download (232Kb) | Preview
This study tests the determinants of capital structure for the firms listed in the Bursa Malaysia Securities Berhad (BMSB) market during the six year period from 1999 through 2005. The financial statements of 17 companies with numbers of observations totaling 102 are used. We use dependent variable of debt ratio and is expressed by total debt divided by total assets while the independent variables are size, growth, liquidity and interest coverage ratio. Applying pooled OLS estimations, the result shows that the size, liquidity and interest coverage ratio is significantly negatively related to total debt. However, the study finds insignificant negative relation between capital structure and growth of the firm, expressed by the annual changes of earnings. The results also reveal that there is significant different in capital structure among firms that adopt more debt (more than 30 per cent of their total assets) and those which employ less leverage financing.
|Item Type:||MPRA Paper|
|Original Title:||Capital Structure and Firm Characteristics: Some Evidence from Malaysian Companies|
|Keywords:||Capital structure, firm characteristics, leverage financing, Bursa Malaysia|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G20 - General|
|Depositing User:||WANMANSOR WANMAHMOOD|
|Date Deposited:||13. Apr 2009 05:01|
|Last Modified:||12. Feb 2013 00:42|
Allen, D.E. 1991, “The determinants of the capital structure of listed Australian companies: The financial manager’s perspective”, Australian Journal of Management, 16, 2.
Ang, J., Chua, J and McConnell, J. 1982, “The administrative costs of corporate bankruptcy: A note”, Journal of Finance, 37, 219-26.
Bailey, R.E. 2007, “Corporate finance: The Modigliani-Miller theorems”, Economics of Financial Markets.
Bancel, F. and Mittoo, U.R. 2002, “The determinants of capital structure choice: A survey of European firms”, Working paper, Asper School of Business, University of Manitoba, Canada.
Bradley, M., Jarrel, G.A, and Kim, E.H., 1984, “On the existence of an optimal capital structure: Theory and evidence”, Journal of Finance, 39, 857-878.
Bennet, M. and Donnelly, R. 1993, “The determinants of capital structure: some UK evidence”, British Accounting Review,. 15, pp. 61-89.
Berens, J.L. and Cuny, C.J. 1995, “The capital structure puzzle revisited”, The Review of Financial Studies, Winter,l. 8, 4, pp. 1185-1208.
Berger, P.G, Ofek, E.8c Yermacj, D.L. 1997, “Managerial entrenchment and capital structure decisions”, Journal of Finance, 52(4): 1411-38.
Bevan, A.A. and Danbolt, J. 2004, “Testing for inconsistencies in the estimation of UK capital structure determinants”, Applied Financial Economics, 14(1):pp. 55-66.
DeAngelo, H., Masulis, R.W., 1980, “Optimal capital structure under corporate and personal taxation”, Journal of Financial Economics, 8, 3-30.
Drobetz, W and Fix, R (2003), “What are the determinants of the capital structure? Some evidence for Switzerland”, Working Paper No.4/03, Department of Finance, University of Basel.
Eriotis, N., Vasilou, D. and Neokosmidi, Z.V., 2007, “How firm characteristics affect capital structure: an empirical study”, Managerial Finance, 33, 5, pp. 321-331.
Givoly, D., Hayn, C., Ofer, A.R and Sarig, O., 1992, “Taxes and capital structure: Evidence from firms’ response in the Tax Reform Act of 1986”, Review of Financial Studies”,5, 331-355.
Groth, J.C and Anderson, R.C. 1997, “Capital structure: Perspectives for managers”, Management Decision 35/7 (1997) 552-561, MCB University Press.
Harris, M. and Raviv, A. 1990, “Capital structure and the informational role of debt”, The Journal of Finance, 45, pp. 321-49.
Harris, M. and Raviv, A. 1991, “The theory of capital structure”, The Journal of Finance, 46, 1, pp. 297-355.
Harvey, C.R.,Lins, K.V, and Roper, A.H, 2004, “The effect of capital structure when expected agency costs are extreme”, Journal of Financial Economics, 74 pp. 3-30.
Hatfield, G.B, Cheng, L.T.W and Davidson, W.N. 1994, “The determination of optimal capital structure: the effect of firm and industry debt ratios on market value”, Journal of Financial and Strategic Decisions, . 7, 3.
Jensen, M.C. & Meckling, W.H. 1976, “Theory of the firm: managerial behavior, agency costs and capital structure”, Journal of Financial Economics, 3: 306-65.
Lasfer, M.A. 1995, “Agency costs, taxes and debt: UK evidence”, European Financial Management, 1(3): 265-85.
Mackie-Mason, J.K., 1990, “Do taxes affect corporate financing decisions?” Journal of Finance, 45, 1471-1493.
Marsh, P., 1982, “The choice between equity and debt: An empirical study”, Journal of Finance, 37, 121-44.
Miller, M.H., 1977, “Debt and taxes”, Journal of Finance, 32, 261-275.
Miller, M.H. 1988, “The Modigliani-Miller propositions after thirty years”, Journal of Economic Perspectives, 2, 4, pp. 99-120.
Modigliani, F. & Miller, M.H. 1963, “Corporate income taxes and the cost of capital: a correction”, American Economic Review, 53, June, pp. 443-53.
Modigliani, F. & Miller, M.H.1958, “The cost of capital, corporate finance and the theory of investment”, American Economic Review, 48, pp. 261-97.
Myers, S.C. 1984, “The capital structure puzzle”, Journal of Finance, . 39 (3): pp. 575-92.
Myers, S.C. and Majluf, N.S. 1984, “Corporate financing and investment decisions when firms have information that investors do not have”, Journal of Financial Economics, 13, pp. 187-221.
Pandey, I.M. 2004, “Capital Structure, profitability and market structure: evidence from Malaysia”, Asia Pacific Journal of Economics & Business, 8, 2. pp.
Pratomo, W.A, Ismail, A.G (2006), “Islamic bank performance and capital structure”, MPRA Paper, No. 6012, posted 29. November 2007/06:24.
Rajan, R.G and Zingales, L. 1995, “What do we know about capital structure? Some evidence from international data”, Journal of Finance, 50, pp.1421-60.
Ross, S., 1977, “The determination of financial structure: The incentive signaling approach”, Bell Journal of Economics, 8, 23-40.
Sato, M. 2002, “ Capital structure and investment behavior of Malaysian firms in the 1990s – a study of corporate governance before the crisis”, CEI Working Paper Series No. 2001-9, Institute of Economic Research, Hitotsubashi University, Japan.
Tang, C.H., Jang, S. 2007, “Revisit to the determinants of capital structure: A comparison between lodging firms and software firms”, Hospitality Management, 26, pp. 175-187.
Titman, S and Wessels, R. 1988, “The determinants of capital structure choice”, The Journal of Finance, 43, 1, pp. 1-19.
Trezevant, R., 1992, “Debt financing and tax status: Tests of the substitution effect and the tax exhaustion hypothesis using firms’ responses to the Economic Recovery Tax Act of 1981”, Journal of Finance, 47, 1557-1568.
Wald, J.K. 1999, “How firm characteristics affect capital structure: an international comparison”, Journal of Financial Research, 22(2): 161-87.
Warner, J. 1977, “Bankruptcy costs: some evidence”, Journal of Finance, Vol. 32, pp. 337-47.