Determinants of Growth: Evidence from the Malaysian ACE Market

Abstract

This paper examines if Gibrat's Law holds for the Malaysian ACE market (access, certainty, and efficiency). It aims to shed light on the empirical determinants of firm growth by extending the literature to include a new variable related to liquidity constraints. Also, the age of the firm is examined for the manner in which it helps explain a firm's growth dynamics. The sample used is a balanced panel data set that covers all firms that managed to survive (84 companies) for the 2008 to 2014 period. By employing panel data modelling (fixed effect), the findings suggest that Gibrat's Law cannot be accepted for the Malaysian ACE market firms as large firms grow faster than small ones. The findings also show that firms listed on this market are extremely financially constrained and that firm growth is mainly explained by firm size, age and liquidity constraints. These results have significant policy implications and require further actions by authorities and policymakers to assess the viability of this market to achieve its objectives.