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International Journal of Academic Research in Business and Social Sciences

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ISSN: 2222-6990

Determinants of Capital Structure in Small and Medium Enterprises in Malaysia: An Exploratory Factor Analysis

Hafizah Mat Nawi, Wan Nur Shawatul Aswal Zulkefle, Ong Hock Siong

http://dx.doi.org/10.6007/IJARBSS/v12-i10/15117

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It is theoretically acknowledged that decisions on capital structure remain an important goal to maximise returns. This study seeks to identify factors influencing the capital structure of Malaysia’s small and medium enterprises (SMEs) through re-assessment of the operationalisation of constructs and an evaluation of certain assumptions on capital structure choices. An analysis of 500 questionnaires from SMEs located in the central region of Peninsular Malaysia was considered in the context of reliability and validity concerning capital structure determinants. The finalised model of capital structure consists of 11 constructs and 40 items. The results of an exploratory factor analysis (EFA) confirmed that external factors such as culture and environment also influenced the capital structure choices of SMEs. Prospective research could validate the framework proposed in this study and establish the framework as a standard measurement exercise to assess SMEs’ capital structure determinants. This study also presented policy implications for strategies to manage, preserve, and enhance economic systems, legal and tax frameworks, and inflation rates that may aid SMEs in accessing different financial sources.

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In-Text Citation: (Nawi et al., 2022)
To Cite this Article: Nawi, H. M., Zulkefle, W. N. S. A., & Siong, O. H. (2022). Determinants of Capital Structure in Small and Medium Enterprises in Malaysia: An Exploratory Factor Analysis. International Journal of Academic Research in Business and Social Sciences, 12(10), 893 – 916.