Factors Influencing Capital Structure of Shariah-Compliant Malaysian Telecommunications and Media Companies

Abstract

This paper explores the firm-specific factors,which are assets tangibility, sales growth, profitability, and firm size in ascertaining the capital structure of Shariah-compliant telecommunications and media companies in Malaysia. Panel data regression model based on ordinary least square (OLS) method was employed in the research. The sample of research comprisesof nine Shariah-compliant companies listed in telecommunications and media sector in the Main Market and Ace Market ofBursa Malaysiafrom 2009to 2018, with a 90firms-years of total number of observations. The dependent variable selected was debt to equity ratio. Meanwhile, the independent variables chosen were assets tangibility, sales growth, profitability, and firm size. Thefindings revealed thatassets tangibilityhas a positive relationship, while profitability is negatively related to the dependent variable. Conversely, sales growth and firm size were insignificant to debt to equity ratio.The pecking order and trade-off theories of capital structure is very much applicable to the Shariah-compliant telecommunications and media in Malaysia sinceassets tangibility and profitability have significant relationship with leverage.