The determinants of capital structure : a study on the construction companies in Malaysia / Zaleha Khamis and Nurul Syuhada Baharuddin

The construction sector in Malaysia is one of the important sectors that contribute to the Gross Domestic Product (GDP). In 2007, it contributes 4.7% of the total growth in the GDP. To continuously be the main player in the market, the construction companies should aware of their combination of capital structure in maintaining the growth and profitability.

In this study, four independent variables; size, profitability, growth and assets tangibility, have been tested to determine the correlation of the variables, and to test which independent variable most influences the debt ratio, the dependent variable, of the construction companies. Using random effect of panel data method, the findings of the study show that three variables; size, growth and assets tangibility have a positive relationship with the debt ratio, while profitability has a negative effect on the debt ratio. From the results obtained, assets tangibility is the variable that has the most influence on the debt ratio.