Determinants of Capital Structure

Journal of Applied Finance & Banking, vol.1, no.2, 2011, 115-132 ISSN: 1792-6580 (print version), 1792-6599 (online) International Scientific Press, 2011

Determinants of Capital Structure for Listed Construction Companies in Malaysia

Nurul Syuhada Baharuddin1, Zaleha Khamis2, Hussian Dollah4

Wan Mansor Wan Mahmood3 and

Abstract

Some studies have determined the impact of financial factors on the failure of firms; such as bad financial management and lack of capital which are the main determinants of failure. The construction industry is generally also facing these problems to some extent. Where the Malaysian scene is concerned, the failure rate of construction companies is quite high. This study examines the debt and equity structure for the construction companies listed in the Bursa Malaysia market during a seven-year period from 2001 to 2007. This sample data derived from financial statements of 42 companies with a number of observations totalling 294. The dependent variable used is debt ratio and expressed by total debt divided by total assets while the independent variables are profitability, size, growth and assets tangibility. Using panel data method, the results show that the profitability

1

Universiti Teknologi Mara Terengganu, Faculty of Business Management, 23000 Dungun, Terengganu, Malaysia, e-mail: nurul574@tganu.uitm.edu.my 2 Universiti Teknologi Mara Terengganu, Faculty of Business Management, 23000 Dungun, Terengganu, Malaysia, e-mail: zaleh522@tganu.uitm.edu.my 3 Universiti Teknologi Mara Terengganu, Faculty of Business Management, 23000 Dungun, Terengganu, Malaysia, e-mail: dwanmans@tganu.uitm.edu.my 4 Universiti Teknologi Mara Terengganu, Faculty of Business Management, 23000 Dungun, Terengganu, Malaysia, e-mail: hussi717@tganu.uitm.edu.my Article Info: Revised : July 30, 2011. Published online : September 30, 2011

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Determinants of Capital Structure

of the construction companies is significant negatively relations to...