Determinants of Capital structure in Indonesia, Malaysia, and the Philippines

Abstract

The paper investigates the impacts of firm-specific and country-specific determinants on capital structure of exchange listed firms in Indonesia, Malaysia, and the Philippines from 2003 to 2014. The contribution of this paper is to complement studies of capital structure in the three countries. The paper also contributes to studies about the impact of Global Financial Crisis 2008 on capital structure.

All regression models in the empirical part are fixed effect Ordinary Least Squares models (OLS). Market leverage ratio, which is a proxy of capital structure, is dependent variable. Independent variables are firm-specific determinants (profitability, tangibility, liquidity, growth opportunity, and firm size) and country-specific determinants (GDP growth rate, inflation rate, and size of stock market).

The paper has two main findings. Firstly, firm-specific and country-specific determinants had important impacts on capital structure of Indonesian, Malaysian, and Philippine firms. Also, there were no considerable differences between capital structure determinants of Indonesia, Malaysia, and the Philippines. Secondly, the paper found that the Global Financial Crisis 2008 had an influence on firms’ capital structure. However, the differences between the effects of firm-specific and country-specific determinants on capital structure before and after the crisis were small.