Capital Structure and Profitability in Family and Non-Family Firms: Malaysian Evidence

AbstractThis study examines the influence of capital structure on profitability of 46 family firms and 46 non-family firms in Malaysia. This study used three measurements for capital structure which are short-term debt ratio, long-term-debt ratio and debt ratio to see the influence on the profitability which is measured by return on equity. Using 276 firm year observations of Malaysian listed companies over three years, 2009 to 2011, the result shows that debt ratio is negatively and significantly related to profitability. The finding suggests that profitable firms depend more on equity as their main financing option. The results confirmed that increase in leverage position is associated with a decrease in profitability