Determinants of Capital Structure from Shariah-Compliant Firms in Travel, Leisure and Hospitality Sector in Malaysia

Amirul Azmin Rohaizan,Mimi Syahirah Abdul Latif,Amir Imran Zainoddin,Wan Nur Syazwina Wan Haswani,Nor Zulaikha Zulkifli

doi:10.6007/ijarbss/v11-i9/10889

Amirul Azmin Rohaizan, Mimi Syahirah Abdul Latif + Show 3 more

Open Access

https://doi.org/10.6007/ijarbss/v11-i9/10889

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Abstract

Capital structure is essential to a firm as it influences both profit and risk to investors. A balanced capital structure reflects the overall health of the company. As a result, the goal of this research is to look into the capital structures of publicly listed Shariah-compliant firms in the travel, leisure, and hospitality sectors. This study examines 5 publicly listed Shariah-compliant companies in Malaysia throughout 2011 – 2020, and the total number of observations utilized is 50. Independent variables such as tangible assets, debt-to-equity, and long-term debt are chosen to indicate capital structure. Profitability or performance is identified as the dependent variable of return on assets (ROA) and return on equity (ROE). The majority of the independent factors in Shariah firms showed a substantial association with the firm's success, according to the study's findings. Shariah businesses' asset tangible (TANG) and debt-to-equity (DTE) ratios have a positive connection with return on asset (ROA), but have an insignificant negative link with return on equity (ROE). Long-term debt (LTD), on the other hand, provided a negative insignificant return on asset (ROA) and a positive insignificant return on equity (ROE).

Highlights

Introduction and Background of StudySince the insightful topic by Modigliani and Miller (1958), the body of knowledge has been documenting an extensive effort on capital structure (Haron, 2014)
The results show that the long-term debt ratio (LTD) is positive and that the performance measures return on asset (ROA) and return on equity (ROE) are inconsequential
The goal of this study is to evaluate the Return on Assets (ROA) and Return on Equity (ROE) of Shariah-compliant companies in the Travel, Leisure, and Hospitality subsectors to determine the influence of profitability on capital structure

Summary

Introduction

Introduction and Background of StudySince the insightful topic by Modigliani and Miller (1958), the body of knowledge has been documenting an extensive effort on capital structure (Haron, 2014). Most businesses choose debt as a source of financing because it provides them with financial flexibility and allows them to run their operations more effectively (Jaafar et al, 2017). This research has made many advances to the drivers of the structure of capital in Shariah companies in travel, leisure and hospitality in Malaysia. Market capitalization for shariah compliance public listed companies in the same month is RM 1,264.95 billion. It shows that the Islamic capital market dominates the capital market by 65.96%. As stated in the report, market-to-market growth had risen from 8.23% in 2019 to 10.85% in 2020 This demonstrated that the Shariah-based financial model is one of the world's fastestgrowing financial sector segments (Abdul Hadi et al, 2018). Conventional finance is mostly a debtbased market that relies on risk transfer, while Islamic finance is asset-based and primarily focused on risk-sharing (Abdul Hadi et al, 2018)

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Conclusion