Asset Structure Impact on Capital Structure of Capital Market-Listed Firms in Indonesia and Malaysia

Abstract

Debt was able to be used by firm as source of funds for investment-related activities,especially when the amount of retained earnings was not sufficient to cover the amountof investment needed. Naturally, the use of debt definitely caused the agency conflictbetween firm shareholders and debt holders. To reduce this conflict, the existence of fixedassets as collateral was needed when firm decided to borrow money from debt holders.The purpose of this study was to prove the agency theory perspective by testing an impactof asset structure on capital structure of firms. The population of this study was the firmslisted on Indonesia Stock Exchange and Malaysian Stock Exchange. The firms as samplewere taken from the population by conducting stratified random sampling method. Thepooled data regression model was used as the data analysis method. This result of thisstudy showed that asset structure had the positive impact on capital structure. It meantthe causal relationship between asset structure and capital structure happened and wassupported by the agency theory perspective