Panel data analysis on the determinants of financial leverage among Malaysian government-linked companies

A study have been carried out to discover the determinants of financial leverage in Government-Linked Companies (GLCs) of Malaysia. The main objective of this study is to determine the factors that can influence the leverage decision of GLCs during the past 10 years. The sample included 15 GLCs that listed in BURSA Malaysia within the period of 2006 until 2015 that contribute to 150 observations. The panel data was collected through the analysis of financial statement stated in the annual report of every companies. Regression analysis including Ordinary Least Squared, Fixed Effect Model and Random Effect Model was conducted to find out which of the model is more appropriate to explain the panel data. As the result showed Fixed Effect Model is more suitable to be used in this study, three of the tested variables was found to be significantly related to financial leverage of GLCs. Independent variable such as Firm Size, Profitability and Liquidity were inversely related to financial leverage. The findings generally support the Pecking Order Theory and similar with some of the past researchers. In practically, this study helps the managers in GLCs and investor to understand the causes of debt policy in the companies