Adjustment factors and firms’ rational financing behaviour. Malaysia evidence

This study examines the capital structure practice of 790 Malaysian firms from 2000 until 2009. Using a dynamic framework results show that firms in Malaysia do practice target capital structure and take into account certain firm characteristics in their capital structure decisions. The firms appear...

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Main Author:	Haron, Razali
Format:	Conference or Workshop Item
Language:	English
Published:	2013
Subjects:	HG4001 Financial management. Business finance. Corporation finance.
Online Access:	http://irep.iium.edu.my/31137/ http://irep.iium.edu.my/31137/ http://irep.iium.edu.my/31137/1/Adjustment_Factors_and_Firms%27_Rational_Financing_Behaviour_Malaysia_Evidence.pdf

id	iium-31137
recordtype	eprints
spelling	iium-311372013-08-23T01:51:43Z http://irep.iium.edu.my/31137/ Adjustment factors and firms’ rational financing behaviour. Malaysia evidence Haron, Razali HG4001 Financial management. Business finance. Corporation finance. This study examines the capital structure practice of 790 Malaysian firms from 2000 until 2009. Using a dynamic framework results show that firms in Malaysia do practice target capital structure and take into account certain firm characteristics in their capital structure decisions. The firms appear to readjust instantaneously when they are off the target indicating low adjustment cost and smaller firms adjust more quickly than their larger counterparts. The use of internal funding implies the influence of the pecking order hypothesis in deciding the readjustment process. Most firms in Malaysia are found to be overly in debt or over-levered due to the good economic growth during the period understudy and are said to behave rationally by cutting down the amount of debt in their capital structure to reach the target. In term of the proximity to target, under-levered firms are found to be much closer to target comparative to the over-levered firms. The optimality ratio of the under-levered firms which corresponds to the fast adjustment speed indicates that the beneﬁts of reaching the target outweigh the adjustment costs. This study contributes to the literature by filling the gap of capital structure studies based on the dynamic model and most importantly by identifying the rational financing behaviour of Malaysian firms. This indication of firms’ proximity to target can help managers to outline and set the next steps to be taken in order to reach the target capital structure to maximise firm value. 2013-07-02 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/31137/1/Adjustment_Factors_and_Firms%27_Rational_Financing_Behaviour_Malaysia_Evidence.pdf Haron, Razali (2013) Adjustment factors and firms’ rational financing behaviour. Malaysia evidence. In: Seminar Hasil Penyelidikan Sektor Pengajian Tinggi Kementerian Pendidikan Malaysia, Ke-3 2013, 2 & 3 July 2013, EDC Hotel, Universiti Utara Malaysia, Kedah. http://submit.confbay.com/index.php?option=com_conf&acid=127&Itemid=1
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG4001 Financial management. Business finance. Corporation finance.
spellingShingle	HG4001 Financial management. Business finance. Corporation finance. Haron, Razali Adjustment factors and firms’ rational financing behaviour. Malaysia evidence
description	This study examines the capital structure practice of 790 Malaysian firms from 2000 until 2009. Using a dynamic framework results show that firms in Malaysia do practice target capital structure and take into account certain firm characteristics in their capital structure decisions. The firms appear to readjust instantaneously when they are off the target indicating low adjustment cost and smaller firms adjust more quickly than their larger counterparts. The use of internal funding implies the influence of the pecking order hypothesis in deciding the readjustment process. Most firms in Malaysia are found to be overly in debt or over-levered due to the good economic growth during the period understudy and are said to behave rationally by cutting down the amount of debt in their capital structure to reach the target. In term of the proximity to target, under-levered firms are found to be much closer to target comparative to the over-levered firms. The optimality ratio of the under-levered firms which corresponds to the fast adjustment speed indicates that the beneﬁts of reaching the target outweigh the adjustment costs. This study contributes to the literature by filling the gap of capital structure studies based on the dynamic model and most importantly by identifying the rational financing behaviour of Malaysian firms. This indication of firms’ proximity to target can help managers to outline and set the next steps to be taken in order to reach the target capital structure to maximise firm value.
format	Conference or Workshop Item
author	Haron, Razali
author_facet	Haron, Razali
author_sort	Haron, Razali
title	Adjustment factors and firms’ rational financing behaviour. Malaysia evidence
title_short	Adjustment factors and firms’ rational financing behaviour. Malaysia evidence
title_full	Adjustment factors and firms’ rational financing behaviour. Malaysia evidence
title_fullStr	Adjustment factors and firms’ rational financing behaviour. Malaysia evidence
title_full_unstemmed	Adjustment factors and firms’ rational financing behaviour. Malaysia evidence
title_sort	adjustment factors and firms’ rational financing behaviour. malaysia evidence
publishDate	2013
url	http://irep.iium.edu.my/31137/ http://irep.iium.edu.my/31137/ http://irep.iium.edu.my/31137/1/Adjustment_Factors_and_Firms%27_Rational_Financing_Behaviour_Malaysia_Evidence.pdf
first_indexed	2023-09-18T20:45:23Z
last_indexed	2023-09-18T20:45:23Z
_version_	1777409640017952768

Adjustment factors and firms’ rational financing behaviour. Malaysia evidence

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