Capital Structure and Firms Determinants: Evidence from Surviving Family and Non-Family Listed Companies in Malaysia

Abstract

This paper examines the relationship between the firms determinants and financial leverage of the surviving listed family and non-family listed companies in Malaysia. A total of 151 surviving publicly listed companies in the Bursa Malaysia were selected from year 2000 to 2015 (16 years), after filtering from the total of 474 companies. The descriptive statistics result was gathered before performing panel data analysis by using fixed effect model. This study applies four determinants as independent variables such as tangibility, growth opportunities, profitability and liquidity with firm size as a control variable. The leverage is measured by the short term debt ratio, long term debt ratio and debt ratio as the dependent variables. The findings reveal that no significant difference on all leverages between the surviving family and non-family firms. In addition, the study found that surviving non-family companies performed slightly better than surviving family companies with a significant difference in term of growth opportunities and profitability. Overall, all determinants are significant to the debt ratio for surviving family, except growth opportunities is found not significant for surviving non-family companies. In a nutshell, surviving family and non-family companies prefer to use internal sources as main priority for financial leverage decisions to sustain its business, supported pecking order theory. Furthermore, the results revealed that surviving companies have sufficient liquid assets, can utilize these funds to finance business activities and have lower leverage. Hence, surviving listed companies in Malaysia tend to manage its leverage wisely for the survival and longevity of business operation in long run.