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The Determinants of Capital Structure: An Empirical Investigation of Malaysian Listed Government Linked Companies

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  • Siti Nur Aqilah Ab Wahab

    (Labuan Faculty of International Finance, University Malaysia Sabah, Jalan Sungai Pagar, 87000 Labuan, Malaysia)

  • Nur Ainna Ramli

    (Islamic Science University of Malaysia, Faculty of Economics and Muamalat, 71800 Nilai, Negeri Sembilan, Malaysia.)

Abstract

In this study, we explore how the debt equity choices of Listed Malaysian Government linked Companies (GLCs) are influenced by the firm specific characteristics and macroeconomic variables using a sample of 13 GLCs from 1997 to 2009. Two elements of leverage, book value of total debt ratio (BVTDR) and long term debt ratio (BVLTDR), were used to check for any significant changes in corporate financing and found mixed results. Tangibility and firm size are the most significant variables to determine the corporate financing of GLCs. Liquidity and interest rate are negatively significant with BVTDR and BVLTDR, respectively.The study concluded that profitability is inconsequential in determining corporate financing; inconsistent with the findings of previous Malaysian studies. With the proper design of capital structure and intervention from the government, the study also concludes that GLCs are rely less on leverage to support their investment activities.

Suggested Citation

  • Siti Nur Aqilah Ab Wahab & Nur Ainna Ramli, 2014. "The Determinants of Capital Structure: An Empirical Investigation of Malaysian Listed Government Linked Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 930-945.
    • Handle: RePEc:eco:journ1:2014-04-19
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    3. Lukman Adebayo Oke & Daud Omotosho Saheed & Yusuf Olamilekan Quadri, 2019. "An Empirical Analysis Of Corporate Capital Structure And Financial Performance Of Listed Conglomerates In Nigeria," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(3), pages 95-114.
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    5. Hanaa El-Habashy, 2018. "Determinants of Capital Structure within the Context of Corporate Governance in Egypt," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(8), pages 1-26, June.
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    More about this item

    Keywords

    Capital structure; Pecking Order Theory; Trade-Off Theory;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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