Ownership concentration and capital structure: Malaysian evidence

This dissertation investigates the relationship between ownership concentration and capital structure. This dissertation also examines the relationship between firm’s financial characteristics (profitability, firm size, asset tangibility liquidity) and capital structure. Both objectives are explored by employing 48 Malaysian public listed firms for the period of 5 financial years, spanning from 2008 to 2012. There are two proxies used to measure ownership concentration; the natural log of total number of shareholders and the fraction of shares hold by the top five largest shareholders. The regression result shows a significantly negative relationship between the fractions of top five shareholdings and leverage ratio, which means that concentrated firms hold lesser debt than dispersed ownership firms. Contradict to agency theory, this finding indicates that MCCG 2012 is still lacking in the area of shareholder’s protection as stated by the World Bank in their recent assessment on MCCG 2012. By looking at the relationship between ownership concentration and capital structure, this dissertation contributes to literature by investigating the effectiveness of MCCG 2012 in addressing and executing shareholder’s right and protection in Malaysia. In addition, this dissertation also finds that profitability, firm size, asset tangibility, and liquidity are the significant determinants of capital structure for Malaysian firms

The relationship between ownership structure, firm specific characteristics and capital structure: evidence from Malaysian middle-capital public listed firms

This study investigates the relationship between ownership structure and firm specific characteristics with capital structure of Malaysian middle-capital pubic listed firms. Although there are many studies conducted on capital structure, very few examine the connection between ownership concentration and ownership dispersion with capital structure particularly in the Malaysian market. By employing a total of 38 middle-capital firms covering period from 2008 to 2012, the results show that debt level in firms with high ownership concentration is significantly different from firms with low concentration level. It is also found that ownership concentration possess a negative relationship with leverage ratio, the measurement for capital structure. This suggests that debt is less likely to be used as monitoring mechanism in highly concentrated firm. This practice could reduce debt related financial distress cost, which in turn lower agency cost although it promotes agency cost related to managerial opportunistic behavior. The findings might help investors to understand more about capital structure and help them to judge corporate governance practice of firms based on the level of ownership concentration and choice of capital structure