Capital structure determinants of shariah-compliant firms / Zahariah Sahuddin ... [et al.]

Sahudin, Zahariah and Ismail, Zuraidah and Sulaiman, Saliza and Abd Rahman, Hamisah and Jaafar, Mohamad Nizam (2019) Capital structure determinants of shariah-compliant firms / Zahariah Sahuddin ... [et al.]. Journal of Emerging Economies & Islamic Research, 7 (1). pp. 1-11. ISSN 2289-2559


This is a preliminary study developed to explore the determinants of capital structure of Shariah-compliant firms listed in Bursa Malaysia. This study is primarily motivated by the issue of the determinants still being inconclusive in the area of capital structure. The study is performed using the static models namely Pool Ordinary Least Square, Fixed Effect and Random Effect Model. Empirical analysis on the determinants reveals that country specific factor which is GDP and sector specific factor which is industry concentration are also significant in influencing the corporate financing decisions in this country along with firm specific factors such as efficiency, bankruptcy risk, profitability, tangibility, liquidity and size of the firm. The findings revealed that results are sensitive to models employed in the study. Nevertheless, the applicability of capital structure theories such as the trade-off theory, agency theory and pecking order theory diverge across sectors in Malaysia. The pecking order theory and agency theory are found to be the dominant theories governing the corporate financing decision in the country as well. It indicates strong evidence of hierarchy practised in firms’ financing decision. The finding on agency theory being dominant justifies the function of short-term debt as a controlling mechanism to mitigate the agency problem arises within firms across sectors


Item Type: Article
CreatorsID Num. / Email
Sahudin, ZahariahUNSPECIFIED
Ismail, ZuraidahUNSPECIFIED
Sulaiman, SalizaUNSPECIFIED
Abd Rahman, HamisahUNSPECIFIED
Jaafar, Mohamad NizamUNSPECIFIED
Subjects: H Social Sciences > HG Finance > Capital costs
H Social Sciences > HG Finance > Capital costs > Malaysia
Divisions: Universiti Teknologi MARA, Selangor > Puncak Alam Campus
Journal or Publication Title: Journal of Emerging Economies & Islamic Research
Journal: UiTM Journal > Journal of Emerging Economies and Islamic Research
ISSN: 2289-2559
Volume: 7
Number: 1
Page Range: pp. 1-11
Item ID: 29346
Uncontrolled Keywords: Capital structure, Trade-off theory, Pecking order theory, Shariah-compliant firm


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