Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence

This study focuses on the dynamic aspect of capital structure which is a relatively new area in the finance literature. By employing panel data, 790 of non-financial listed firms in Malaysia are examined for the period 2000–2009. Conducted using the dynamic Partial Adjustment Model and estimated b...

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Main Authors:	Haron, Razali, Ibrahim, Khairunisah, Mat Nor, Fauzias, Ibrahim , Izani
Format:	Article
Language:	English
Published:	Sage 2013
Subjects:	HG4001 Financial management. Business finance. Corporation finance.
Online Access:	http://irep.iium.edu.my/30003/ http://irep.iium.edu.my/30003/ http://irep.iium.edu.my/30003/ http://irep.iium.edu.my/30003/1/04_GBR~14_2_Razali_Haron_P3.pdf

id	iium-30003
recordtype	eprints
spelling	iium-300032014-11-17T02:57:15Z http://irep.iium.edu.my/30003/ Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence Haron, Razali Ibrahim, Khairunisah Mat Nor, Fauzias Ibrahim , Izani HG4001 Financial management. Business finance. Corporation finance. This study focuses on the dynamic aspect of capital structure which is a relatively new area in the finance literature. By employing panel data, 790 of non-financial listed firms in Malaysia are examined for the period 2000–2009. Conducted using the dynamic Partial Adjustment Model and estimated based on the Generalized Method of Moment, this study investigates the existence of target capital structure, speed of adjustment and factors affecting speed of adjustment. There are evidences of target capital structure and firms do adjust to be at their target from time to time with a considerably rapid speed of adjustment, in line with dynamic trade-off theory. Firms in Malaysia are found to be under-adjusted, being below the required adjustment to be at the target within a year. Study on factors affecting speed of adjustment is a new contribution to the literature as no work has been done regarding this issue in Malaysia. This study also analyzes firm-specific factors affecting speed of adjustment. There is strong evidence on the negative relationship between the speed of adjustment and distance from target leverage suggesting fast adjustment if not being far from target. Firm size and profitability significantly influence speed of adjustment for firms in Malaysia. Sage 2013-06 Article PeerReviewed application/pdf en http://irep.iium.edu.my/30003/1/04_GBR~14_2_Razali_Haron_P3.pdf Haron, Razali and Ibrahim, Khairunisah and Mat Nor, Fauzias and Ibrahim , Izani (2013) Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence. Global Business Review, 14 (2). pp. 243-262. ISSN 0972-1509 http://gbr.sagepub.com DOI: 10.1177/0972150913477469
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG4001 Financial management. Business finance. Corporation finance.
spellingShingle	HG4001 Financial management. Business finance. Corporation finance. Haron, Razali Ibrahim, Khairunisah Mat Nor, Fauzias Ibrahim , Izani Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence
description	This study focuses on the dynamic aspect of capital structure which is a relatively new area in the finance literature. By employing panel data, 790 of non-financial listed firms in Malaysia are examined for the period 2000–2009. Conducted using the dynamic Partial Adjustment Model and estimated based on the Generalized Method of Moment, this study investigates the existence of target capital structure, speed of adjustment and factors affecting speed of adjustment. There are evidences of target capital structure and firms do adjust to be at their target from time to time with a considerably rapid speed of adjustment, in line with dynamic trade-off theory. Firms in Malaysia are found to be under-adjusted, being below the required adjustment to be at the target within a year. Study on factors affecting speed of adjustment is a new contribution to the literature as no work has been done regarding this issue in Malaysia. This study also analyzes firm-specific factors affecting speed of adjustment. There is strong evidence on the negative relationship between the speed of adjustment and distance from target leverage suggesting fast adjustment if not being far from target. Firm size and profitability significantly influence speed of adjustment for firms in Malaysia.
format	Article
author	Haron, Razali Ibrahim, Khairunisah Mat Nor, Fauzias Ibrahim , Izani
author_facet	Haron, Razali Ibrahim, Khairunisah Mat Nor, Fauzias Ibrahim , Izani
author_sort	Haron, Razali
title	Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence
title_short	Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence
title_full	Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence
title_fullStr	Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence
title_full_unstemmed	Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence
title_sort	factors affecting speed of adjustment to target leverage: malaysia evidence
publisher	Sage
publishDate	2013
url	http://irep.iium.edu.my/30003/ http://irep.iium.edu.my/30003/ http://irep.iium.edu.my/30003/ http://irep.iium.edu.my/30003/1/04_GBR~14_2_Razali_Haron_P3.pdf
first_indexed	2023-09-18T20:44:02Z
last_indexed	2023-09-18T20:44:02Z
_version_	1777409555538378752

Factors Affecting Speed of Adjustment to Target Leverage: Malaysia Evidence

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