Capital structure of Malaysian food producing companies / Siti Nur Izziana Halil

The capital structure is an important part in decision making which determines the overall cost firm and also the market value of the firm. Finance manager needs to determine when it is needed for starting the firm operation or for additional fund to finance new projects because the capital structure is consist of debts and owners' equity. Every industry has different factors that influence the capital structure which is if there is a wrong decision on a matter related to financing, the firms may face financial distress and eventually to bankruptcy. There are many factors that affect the capital structure which also influence the performance of the firm itself, such as size, tangibility, growth, profitability, liquidity, asset structure, risk and others. The objective of this study isto identify the relationship between the capital structure and its determinants of capital structure of the food producing sector in Malaysia. The dependent variable is leverage and the independent variables consist of firm size, growth rate, profitability, liquidity and asset structure. The sample of data covers 6 companies in Malaysia from the food producers sector that listed on Bursa Malaysia which covers the period 20062015. Descriptive test, regression model, correlation, heterocedasticity, autocorrelation and multicollinearity were analysed by using STATA. The result of this study shows that profitability is significant with leverage. However, size, growth rate, profitability and asset structure are negatively related to the capital structure which indicates that size, growth rate, liquidity and asset structure were not an important variable of leverage in food producing industry. It also shows that food produces industry follow the pecking order theory.