Capital Structure and Firm Performance of Technology Sector in Malaysia

Ngui, Joanne Jia En and Nurul Izza, Abd Malek (2021) Capital Structure and Firm Performance of Technology Sector in Malaysia. INTERNATIONAL JOURNAL OF ACADEMIC RESEARCH IN ACCOUNTING, FINANCE AND MANAGEMENT SCIENCES, 11 (3). pp. 601-628. ISSN 2225-8329

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Abstract

The purpose of this study is to investigate the relationship between capital structure and firm performance of technology sector in Malaysia. The 27 public listed software companies in Bursa Malaysia are examined within the time period of 8 years from 2012 to 2019, with the total observation of 216. The data is focusing in one sub-sector of technology sector which is software sector. The study is conducted with two firm performance measures which are return on asset (ROA) and return on equity (ROE). Total debts to total assets (TDTA), long-term debt to total assets (LTDTA), and short-term debt to total assets (STDTA) are the proxies of capital structure while growth (GRO) is the control variable. Panel data regression model is used in this study and found that that long-term debt to total assets (LTDTA) and short-term debt to total assets (STDTA) have a negative significant relationship with return on equity (ROE) while total debt to total assets (TDTA) has a positive significant effect on return on equity (ROE). However, in return on assets (ROA), only short-term debt to total assets (STDTA) has a negative significant on it, while the other independent variables are insignificant. Lastly, there is a positive significant relationship between growth (GRO) and performance of a company.

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