The determinant of capital structure of SMEs in Malaysia: Evidence from enterprise 50 (E50) SMEs

Asmawi Noor Saarani, Faridah Shahadan

    Research output: Contribution to journalArticle

    7 Citations (Scopus)

    Abstract

    Capital structure have implications in determining the ability and success of a firm, especially to small and medium-sized enterprises (SMEs). This paper analyses the capital structure of SMEs in Malaysia focusing on Enterprise 50 (E50) SMEs. E50 is an annual awards program initiated by government and organized by SME Corporation & Deloitte Malaysia since 1997 to recognize the 50 best SME companies in Malaysia based on their performances and potential to succeed. The secondary data from Companies Commission of Malaysia has been collected for the study. The study employed regression analysis on 334 companies, utilised the accounting data for the five year period of 2005 to 2009. Capital structure is the Dependent Variable referring to debt ratio of the companies, decomposed into Long Term Debt ratio and Short term Debt ratio. The Independent Variables (IV) are age; size; tangibility; liquidity; profitability; growth and taxation. Two theories of capital structure have guided this study i.e. the Trade-Off Theory and the Pecking Order Theory. The study found that size is important if we decomposed the debt into longand short term. In addition, asset tangibility, liquidity and profitability are the main capital structure determinants for SMEs. Age and growth are important for a long term, while taxation is not an important consideration in capital structure decision.

    Original languageEnglish
    Pages (from-to)64-73
    Number of pages10
    JournalAsian Social Science
    Volume9
    Issue number6
    DOIs
    Publication statusPublished - 28 Apr 2013

    Fingerprint

    small and medium-sized enterprise
    Malaysia
    determinants
    indebtedness
    evidence
    liquidity
    profitability
    taxation
    decision structure
    Enterprise
    Small and Medium-sized Enterprises
    Capital structure
    Small and medium-sized enterprises
    corporation
    regression analysis
    assets
    firm
    Debt
    ability
    performance

    Keywords

    • Capital structure
    • Determinant factors
    • Regression analysis

    ASJC Scopus subject areas

    • Social Sciences(all)
    • Arts and Humanities(all)
    • Economics, Econometrics and Finance(all)

    Cite this

    The determinant of capital structure of SMEs in Malaysia : Evidence from enterprise 50 (E50) SMEs. / Noor Saarani, Asmawi; Shahadan, Faridah.

    In: Asian Social Science, Vol. 9, No. 6, 28.04.2013, p. 64-73.

    Research output: Contribution to journalArticle

    Noor Saarani, Asmawi ; Shahadan, Faridah. / The determinant of capital structure of SMEs in Malaysia : Evidence from enterprise 50 (E50) SMEs. In: Asian Social Science. 2013 ; Vol. 9, No. 6. pp. 64-73.
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