The determinants of capital structure decision of selected ASEAN countries

SHASHI KUMAR, KANESAN (2009) The determinants of capital structure decision of selected ASEAN countries. PhD thesis, University of Malaya.

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Abstract This study examined the firm-specific and macroeconomic factors affecting the capital structure decision of public listed companies in the selected ASEAN countries, namely Malaysia, Indonesia, Philippines, Thailand and Singapore. Among the independent factors examined include asset tangibility, financial flexibility, liquidity, profitability, size, GDP growth, inflation rate and interest rate while three dependent variables are used for measuring capital structure, namely short-term debt ratio, longterm debt ratio and total debt ratio. The second objective of this study is to test whether the 1997-98 ASEAN financial crisis have altered the corporate financing decision of the selected ASEAN countries. The third objective is designed to find out whether there are any significance differences in the mean capital structure between various industries of selected ASEAN countries. The sources of data for this study are Balance sheets and Income Statements of companies over 14 years period from 1992 till 2005, which are mainly extracted from the Bloomberg. The generalized least square (GLS) regression methods had been used to run the analysis of the panel data with white heteroscedasticity-corrected variances and standard errors. On the overall basis, the results of the study in the ASEAN countries are consistent with the predictions of theoretical studies and the results of previous empirical work. The factor that are commonly affecting the capital structure that are seen in the developed nations form past studies are the similar factors that affects the capital structure decisions of Malaysia, Indonesia, Philippines, Thailand and Singapore. In all these countries, there are sufficient evidence of companies complying to two major theories, static trade off theory and pecking order hypothesis. The evidence on agency cost theory is not very clear in all these countries. As expected, asset tangibility is positively related to long term debt ratio of all the selected ASEAN countries. From the positive association, it is clear that collateral value of fixed assets generally motivates companies to take long term debt and total debt in the selected ASEAN countries. Mix results aree noted for financial flexibility, liquidity and profitability, however the results seems to dominate negative relationship with debt ratios that indicate the evidence for pecking order hypothesis. However, financial flexibility in Singapore and profitability in Philippines appeared positive to capital structure choice and this shows compliance of the static trade off theory. Company size is positively related to long term debt ratio and total debt ratio of Malaysia, Indonesia, Thailand and Singapore while in the Philippines, it appeared insignificant. Although GDP growth, inflation rate and interest rate affects capital structure choice, mix results are noted on five selected countries. This study also shows that 1997-98 financial crisis had altered the financing decision of companies in the selected ASEAN countries as revealed by the different results of the factors affecting capital structure decision during pre-crisis and post-crisis period. Significant differences were found in capital structure among the different industries of all the selected ASEAN countries. ABSTRAK Penyelidikan ini mengkaji faktor khusus firma dan faktor makroekonomi yang mempengaruhi keputusan struktur modal syarikat awam di kalangan Negara ASEAN yang terpilih, iaitu Malaysia, Indonesia, Filipina, Thailand dan Singapura. Di antara faktor pembolehubah bebas yang dikaji termasuk keketaraan aset, kelewesan kewangan, kecairan, keuntungan, saiz firma, pertumbuhan KDNK, kadar inflasi dan kadar faedah manakala tiga variable dependent yang digunapakai untuk mengira struktur modal adalah nisbah hutang jangka pendek, nisbah hutang jangka panjang dan nisbah jumlah hutang. Objektif kedua kajian ini adalah untuk menguji samada 1997-98 krisis kewangan ASEAN mempengaruhi keputusan kewangan korporat oleh negara ASEAN yang dipilh di dalam kajian ini. Objektive ketiga kajian ini adalah untuk menguji samada terdapat perbezaan ketara pada purata struktur modal di kalangan industri negara ASEAN yang terpilih. Sumber data untuk kajian ini adalah penyata keuntungan dan penyata kira-kira untuk tempoh 14 tahun, iaitu dari 1992 hingga 2005 yang didapati daripada Bloomberg. Kaedah ‘Generalized Least Square” regresi digunakan untuk menganalisa data panel. Secara keseluruhannya, keputusan kajian ini adalah konsisten dengan jangkaan kajian teori dan keputusan kajian empirik yang lepas. Faktor yang mempengaruhi keputusan struktur modal untuk negara maju dari kajian yang lepas adalah faktor yang agak serupa mempengaruhi keputusan struktur modal bagi Negara ASEAN yang terpilih. Di dalam kajian ini juga, boleh disimpulkan bahawa terdapat bukti syarikat ASEAN yang terpilih mengikuti dua teori utama, iaitu teori “static trade off” dan teori “pecking order”. Tiada terdapat bukti yang kukuh untuk syarikat ASEAN mengikuti teori “agency cost”. Seperti yang dijangkakan, aset keketaraan mempengaruhi nisbah hutang jangka panjang secara positif ke atas negara-negara ASEAN yang terpilih. Keputusan yang bercampuran diperhatikan untuk kelewesan kewangan, kecairan dan keuntungan, di mana keputusan banyak memihak kepada hubungan secara negatif dengan struktur modal dan ini membuktikan kewujudan “pecking order hypothesis”. Walaubagaimanapun, kelewesan kewangan di Singapura dan keuntangan di Filipina memperlihatkan hubungan secara langsung dengan struktur modal dan ini menunjukkan kepatuhan kepada teori “static trade off”. Saiz firma menpengaruhi nisbah hutang jangka panjang dan nisbah jumlah hutang Malaysia, Indonesia, Thailand dan Singapura secara langsung manakala tiada hubungan didapati di Filipina. Walaupun faktor-faktor makroekonomi, iaitu Pertumbuhan dalam KDNK, kadar inflasi dan kadar faedah mempengaruhi keputusan struktur modal, keputusan yang bercampuran dilihat untuk kelima-lima negara ASEAN yang dipilih. Penyelidikan ini juga mendapati krisis kewangan 1997-98 mengubah keputusan kewangan syarikat ASEAN yang terpilih seperti mana yang dilihat daripada keputusan yang berbeza diperolehi untuk faktor-faktor yang mempengaruhi struktur modal sebelum krisis dan selepas krisis kewangan. Juga didapati bahawa terdapat perbezaan yang ketara di antara struktur modal di kalangan berlainan industri bagi syarikat negara ASEAN yang terpilih.

Item Type: Thesis (PhD)
Uncontrolled Keywords: Capital structure, ASEAN countries, Financial flexibility, Financial crisis, Macroeconomic factors
Subjects: J Political Science > JZ International relations
Date Deposited: 23 Jul 2013 00:55
Last Modified: 23 Jul 2013 00:55

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