Authors : Noryati Ahmad and Yon Bahiah Wan Aris
Abstract: Trading and services sector has been identified as the next engine growth for Malaysia, since the country’s manufacturing sector has lost its ability to sustain its export-led growth. Similar to other sectors, optimal capital structure is also a pertinent issue for trading and services sector. Hence, this study aims to uncover the firm-specifics determinants that have significant influence on the capital structure decision of companies in trading and services sector. The sample comprises of 181 trading and services companies listed in Bursa Malaysia Main Market. The data covers the period from the year 2007 until 2011. Three pooled Ordinary Least Square (OLS) equations are estimated using three different leverage proxies. The findings reveal that tangibility, profitability, firm size, firm growth, non-debt tax shield, earning volatility, liquidity and firm age are able to explain capital structure decision of firm in trading and services sector in Malaysia. Age of the firm, also play an important role in the firm’s decision to seek for debt financing. Although, three capital structure theories can jointly explain the capital structure of Malaysia’s trading and services companies, however, the pecking order theory tends to dominate the other theories for the trading and services companies.
Noryati Ahmad and Yon Bahiah Wan Aris, 2015. Does Age of the Firm Determine Capital Structure Decision? Evidence from Malaysian Trading and Service Sector. International Business Management, 9: 200-207.