The Determinants Of Capital Structure : Empirical Analysis Of Trading And Service Sector In Malaysia

This paper is investigates the determinants of debt ratio for trading and service sector in Malaysia. This type of study is panel analysis which investigates from the year 2007-2011. The trade-off theory and pecking order theory used for examine the decision of firm issue debt. These theories apply to explain how variables influence the debt ratio. These variables consist of firm size, growth opportunities, profitability, tangible assets, non-debt tax shield and liquidity ratio. If firms use more debt for funding, debt tax shield benefits will be given to firms but bankruptcy cost also exist at the same time. Hence, this study intends to find out that the failure of debt in providing tax shield benefits and the trend of debt taken after economic crisis. The result of this study found that firm size, growth opportunities, profitability and liquidity ratio are statistically significant influence debt ratio