Open AccessDeterminants of Capital Structure: Evidence From Malaysian Food and Beverage Firms
Author(s) -
Mohd Faizal Basri,
Fitri Shuhaida Shoib,
Surianor Kamaralzaman
Publication year - 2019
Publication title -
research in world economy
Language(s) - English
Resource type - Journals
eISSN - 1923-399X
pISSN - 1923-3981
DOI - 10.5430/rwe.v10n5p45
Subject(s) - market liquidity , capital structure , profitability index , return on assets , working capital , debt ratio , panel data , business , monetary economics , pecking order theory , debt , variables , return on equity , weighted average return on assets , return on capital employed , ordinary least squares , asset (computer security) , equity (law) , finance , economics , econometrics , microeconomics , financial capital , capital formation , statistics , profit (economics) , mathematics , computer security , computer science , political science , law
This paper investigates the firm-specific elements, which are profitability, growth, tangible assets and liquidity in determining the capital structure of Food and Beverage (F&B) firms in Malaysia. The research employed panel data regression model based on ordinary least square (OLS) method. The sample of research consists of eight firms listed in the food producer segment in Bursa Malaysia for the period between 2013 and 2018, with a total observation of 48 firms-years. Debt to equity was chosen as dependent variable. On the other hand, profitability, asset growth, tangibility of assets, and liquidity were selected as independent variables. The findings showed that profitability and tangibility of assets are positively related to debt to equity. Meanwhile, growth of assets and liquidity were insignificant to the dependent variable. The trade-off theory of capital structure is very much applicable to the F&B firms in Malaysia due to the fact that profitability and tangibility of assets have significant relationship with debt.