The Effect of Cash Flow on Capital and Asset Structure

GSM 5114

BUSINESS RESEARCH METHODS

Project Paper

(THE EFFECT OF CASH FLOWS ON CAPITAL AND ASSET STRUCTURE)

Prepared For:

DR. KHAIRIL WAHIDIN AWANG

By:

Lee Aik Keang GM04195

Jayamalini GM04203

Subramanian GM04209

Khantan GM03881

Jeeva GM04216

EXECUTIVE SUMMARY

This paper documents the effect of cash flows on capital and asset structure using modified version of Almeida’s (2004) model of cash holding behavior and mainly focus on the leverage, market capitalization and market performance of companies in different industries. This studies is based on 200 samples of listed companies in Bursa Malaysia over a period of five years (2007 -2011) and use the main five functions of cash holdings which is the Size, Tobin’s Q, Operating Cash Flows, Debts and Non-Cash Net Working Capital. Therefore, the Tobin’s Q was used as a proxy for market performance measurement and tested with two different methods. Meanwhile, the debts were measured in two different methods as well use short term and total debts. Therefore, the F-test was applied to identify the most significant variable in Tobin’s Q and debts measurement. Finally, the multiple linear regression method used to determine the relationship of cash flows on capital and asset structure. The findings appears that is a positive significant relationship between cash flows, capital and asset structure by controlling companies specific factors such as market capital, market performance and debts.

TABLE OF CONTENTS

Page

CHAPTER 1: INTRODUCTION 4

1.1 Chapter Description

1.2 Background of Study

1.3 Problem Statement

1.4 Objectives of Study

1.5 Scope of Study

1.6 Hypothesis

1.7 Significant of Study

1.8.1 The Researchers

1.8.2 The Companies

1.8.3 The Investors

CHAPTER 2: LITERATURE REVIEW 11

CHAPTER 3: RESEARCH METHODOLOGY 16

3.1 Chapter Description

3.2 Sample Collection...