Open AccessDoes Corporate Debt influence the Firms’ Growth after Global Financial Crisis? Evidence from Malaysian Public Listed Companies
Author(s) -
M H Nur Syabihah,
Mohamed Hisham Yahya,
Meishan Chua
Publication year - 2021
Publication title -
journal of international business, economics and entrepreneurship
Language(s) - English
Resource type - Journals
ISSN - 2550-1429
DOI - 10.24191/jibe.v6i1.14444
Subject(s) - debt , pecking order , business , pecking order theory , debt to equity ratio , financial crisis , equity (law) , finance , capital structure , debt levels and flows , debt ratio , financial system , equity value , corporate finance , order (exchange) , financial distress , external debt , monetary economics , internal debt , economics , macroeconomics , population , demography , evolutionary biology , sociology , biology , political science , law , nonprobability sampling
This paper aims to investigate the impact of corporate debt on firm growth in Malaysia post Global Financial Crisis 2007-2008. Using a sample of 334 non-financial public listed companies in Bursa Malaysia from 2009 to 2018, this study finds that corporate debt is positively associated with firm growth. The possible reasons for this are; 1) the underdeveloped equity market in Malaysia that forced the firms to take up more debt as a financing resource and 2) the highly associated cost of issuing shares caused the firms to choose debt over equity, to finance the firms’ growth. The result is robust using the random effects panel regression model which mitigates unobserved heterogeneity. The finding supports the Pecking Order theory. The practical contribution of the study lies in the need for firms to deliberately design the application of debt in order to mitigate the associated cost of financial distress that arises from debt.