An empirical study of Malaysian firms' capital structure
type: CreativeWork
description: It is sometimes purported that one of the factors affecting a firm's value is its capital structure. The event of the 1997 Asian financial crisis was expected to affect the firms' gearing level as the firms' earnings deteriorated and the capital market collapsed. The main objective of this research is to examine empirically the determinants of the capital structure of Malaysian firms. The main additional aim is to study the capital structure pattern following the 1997 financial crisis. Empirical tests were conducted on two different data sets: the first data set is the published data extracted from Datastream and consists of: 572 companies listed on the Kuala Lumpur Stock Exchange (KLSE) between 1994 and 2000. The second data set comprises finance managers' responses to a questionnaire survey. Chi-square, Kruskal-Wallis, ANOVA, multiple regression, stepwise regression and logistic regression were utilised to analyse the data. The multiple regression analysis was employed to find the determinants of the capital structure using various account data items provided by Datastream. The gearing differences between the two boards and within the sectors were also analysed using ANOVA and Krukal-Wall is tests. The panel data were evaluated with regard to the gearing pattern following the 1997 currency crisis. Overwhelming evidence on profit was found, with past profitability being the major determinant of gearing. In particular was the support for pecking order theory, in that finance managers had given internal funds the highest priority, followed by debt and equity as a last option. The statistical analysis found a strong negative correlation between liquidity and the gearing ratio for both boards, implying firms considered highly the excess current assets for funding, a conservative approach towards debt management policy. On the other hand, taxation items were not highly significant in capital structure decisions. The results indicate the existence of gearing differences …
abstract: It is sometimes purported that one of the factors affecting a firm's value is its capital structure. The event of the 1997 Asian financial crisis was expected to affect the firms' gearing level as the firms' earnings deteriorated and the capital market collapsed. The main objective of this research is to examine empirically the determinants of the capital structure of Malaysian firms. The main additional aim is to study the capital structure pattern following the 1997 financial crisis. Empirical tests were conducted on two different data sets: the first data set is the published data extracted from Datastream and consists of: 572 companies listed on the Kuala Lumpur Stock Exchange (KLSE) between 1994 and 2000. The second data set comprises finance managers' responses to a questionnaire survey. Chi-square, Kruskal-Wallis, ANOVA, multiple regression, stepwise regression and logistic regression were utilised to analyse the data. The multiple regression analysis was employed to find the determinants of the capital structure using various account data items provided by Datastream. The gearing differences between the two boards and within the sectors were also analysed using ANOVA and Krukal-Wall is tests. The panel data were evaluated with regard to the gearing pattern following the 1997 currency crisis. Overwhelming evidence on profit was found, with past profitability being the major determinant of gearing. In particular was the support for pecking order theory, in that finance managers had given internal funds the highest priority, followed by debt and equity as a last option. The statistical analysis found a strong negative correlation between liquidity and the gearing ratio for both boards, implying firms considered highly the excess current assets for funding, a conservative approach towards debt management policy. On the other hand, taxation items were not highly significant in capital structure decisions. The results indicate the existence of gearing differences …
author: Zain, Sharifah Raihan Syed Mohd
language: eng
date published: 2003-01-01T08:00:00Z
date modified: 2026-07-24T03:49:55Z
provider: University of Plymouth
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Plymouth