Determinants of capital structure based on consumer product sector in Malaysia / Muhammad Amiruddin Asyraaf Hanafir

The decisions of financial which are set by the management play an important role in determining the optimal capital structure. Capital structure decisions are important as it influences the shareholder’s return, risk and the market value of the share. Capital structure is one of the most puzzling issues in corporate finance literature (Brounen & Eichholtz, 2001). An incorrect financial decision may lead to financial distress and bankruptcy (Eriotis, Vasiliou, & Neokomidi, 2007). Capital structure refers to the firm’s financing through different sources like equity and debt. Equity can be in common and preferred equity while debt can be in short term and long term debt. Capital structure refers to the financial of the firm in order to finance their funds for investment from two sources. There are loan from bank which are called as debt and the other sources is issues their share to public which are called equity financing. Besides that, capital structure is a ratio of debt to equity. Ajao and Ema (2012) had stated that debt comprises of long term loan such as debenture and equity to finance it investment.