A remarkable effect of bond market development on corporate financing is detected among firms in Malaysia en route
the study to identify the existence of target capital structure and simultaneously explore firm specific and country
specific determinants of target capital structure for firms in Malaysia. This is argued to be the effect of the
phenomenal development of sukuk, or Shariah-compliant bonds in Malaysia. The distinctive effect of bond market
development with sukuk element on Malaysian firms shows the substantial influence of country specific factors like
bond market development as well as governance incorporate financing decision. Employing the dynamic Partial
Adjustment Model estimated based on the Generalized Method of Moments (GMM) estimator using data of nonfinancial
listed firms for the period of 2000-2009, this study contributes to the existing literature by highlighting the
impact ofa well-developed sukuk in bond market development on corporate financing decision and how good
governance can ensure liquid and vibrant bond market as an alternative financial intermediary. This study concludes
that several factors significantly influence target capital structure and the element of sukuk in bond market in Malaysia
coupled with good governance have a substantial impact on corporate financing decision among firms in Malaysi
