Determinants of Capital Structure: Evidence From Malaysian Food and Beverage Firms

Abstract

This paper investigates the firm-specific elements, which are profitability, growth, tangible assets and liquidity in determining the capital structure of Food and Beverage (F&B) firms in Malaysia. The research employed panel data regression model based on ordinary least square (OLS) method. The sample of research consists of eight firms listed in the food producer segment in Bursa Malaysia for the period between 2013 and 2018, with a total observation of 48 firms-years. Debt to equity was chosen as dependent variable. On the other hand, profitability, asset growth, tangibility of assets, and liquidity were selected as independent variables. The findings showed that profitability and tangibility of assets are positively related to debt to equity. Meanwhile, growth of assets and liquidity were insignificant to the dependent variable. The trade-off theory of capital structure is very much applicable to the F&B firms in Malaysia due to the fact that profitability and tangibility of assets have significant relationship with debt.