THE CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE IN MALAYSIAN COMPANIES

YONG, SIEW MEI (2014) THE CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE IN MALAYSIAN COMPANIES. [Final Year Project Report] (Unpublished)

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Abstract

Capital structure is defined as the financial tool that helps the firm to determine the source of finance. The optimal capital structure has being the focus of attention in many academic and financial institutions long time ago because the guidance might be helpful for those operators in selecting the right capital structure which can add value to the firm. This study aims to examine the impact of capital structure on financial performance in Malaysian companies. Besides, this study also attempts to identify the relationship between capital structure and financial performance. A sample size of 40 listed companies for the period of 2007 to 2011 is used in this study. For the purpose of this study, correlation coefficient, Granger causality, panel data analysis, Breusch and Pagan Lagrangian Multiplier test and Hausman test are used for the analysis. The results reveal that there is significant positive relationship between long-term debt ratio (LTDR) and return on equity (ROE). Short-term debt ratio (STDR) is found insignificant positive impacts the financial performance. Moreover, a significant negative relationship exist between debt-to-equity ratio (DTER) and ROE.

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