Authors : Hafezali Iqbal Hussain, H. Obsatar Sinaga, M. Haizam M Saudi, Firdaus Hilmi Nadzri, Nur Surayya M. Saudi, Mohd Nazrul Azizi and Mohd Farid Shamsudin
Abstract: The study empirically tests the speed of adjustment of a sample of Malaysian firms. We find that Shari’ah compliance influences the speed of adjustment implying that cost of capital for Shari’ah compliant firms differ from non-compliant firms. Our tests further show that Shari’ah compliant companies whose leverage leves are above target tend to adjust more rapidly to target levels than non-compliant firms. The evidence provides an opposite conclusion on firms below target levels. The findings provide a notion of debt versus equity choice for Shari’ah compliant firms versus non-compliant firms indicating that preference is guided by implied cost of capital which differs based on the extent of current leverage levels.
Hafezali Iqbal Hussain, H. Obsatar Sinaga, M. Haizam M Saudi, Firdaus Hilmi Nadzri, Nur Surayya M. Saudi, Mohd Nazrul Azizi and Mohd Farid Shamsudin, 2018. Capital Structure Speed of Adjustment and Shari’ah Compliance: Empirical Evidence from Malaysia. Journal of Engineering and Applied Sciences, 13: 2103-2107.