ISSN: 2222-6990
Open access
Corporate Governance has become the most inevitable issues around the world as the emergence of prominent corporate scandals, for example, Enron and WorldCom. It was also known as an important key of leading good financing decision in a company. The motivation behind this project sought to investigate the influences of the Corporate Governance practices on capital structure decision among Top 100 companies for overall Corporate Governance and performance in Malaysian Capital Market over the period 2012 to 2016. All data was gathered from annual report of Malaysian listed firms in Bursa Malaysia Stock Exchange, excluding the financial companies due to their special rules and regulation in their Corporate Governance system. This study has been employed descriptive analysis, correlation analysis and fixed effects regression model to find out the research objectives. Results from the research indicate that board gender, independence audit committee, and profitability were statistically negative to leverage. Further, the research also found that large firm size with high managerial ownership will pursue high debt policy. Nonetheless, debt- to-equity ratio has no zero relationship with board size and board independence. These findings will be useful to the policymaker to formulate Corporate Governance mechanisms as well as investors for assessing the listed companies in Malaysia before making investment decision.
Abor, J. (2007). Corporate Governance and financing decisions of Ghanaian listed firms. The International Journal of Business in Society, 7(1), 83-92.
Achchuthan, S., Kajananthan, R., & Sivathaasan, N. (2013). Corporate Governance practices and capital structure: A case in Sri Lanka. International Journal of Business and Management, 8(21), 114-125.
Adegbile, S. A. (2015). Corporate Governance attributes and capital structure of listed firms in the Nigerian food and beverages industry. International Journal of Public Administration and Management Research, 3(1), 48-56.
Agyei, A., & Owusu, A. R. (2014). The effect of ownership structure and Corporate Governance on capital structure of Ghanaian listed manufacturing companies. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 109-118.
Ali, R. A., & Ahmed, A. (2015). Corporate Governance and capital structure: Empirical evidence from textile weaving companies of Pakistan. South Asian Journal of Banking and Social Sciences, 1(1), 60-73.
Arslan, M., Zaman, R., Malik, R. K., & Mehmood, A. (2014). Impact of CEO duality and audit committee on firm performance: A study of oil & gas listed forms of Pakistan. Research Journal of Finance and Accounting, 5(17), 151 156.
Berger, P. G., Ofek, E., & Yermack, D. L. (1997). Managerial entrenchment and capital structure decision. The Journal of Finance, 52(4), 1411-1438.
Bhatt, P. R. (2016). Corporate Governance in Malaysia: has MCCG made a difference. International Journal of Law and Management, 58(4), 403-415.
Bokpin, G. A., & Arko, A. C. (2009). Ownership structure, Corporate Governance and capital structure decisions of firms: Empirical evidence from Ghana. Studies in Economics and Finance, 26(4), 246-256.
Brealey, R. A., Myers, S. C., & Allen, F. (2014). Principles of corporate finance. New York, NY: McGraw-Hill Education.
Bursa Malaysia Berhad. (2017). Retrieved from: http://www.bursamalaysia.com/market
Cadbury, A. (1992). Report of the committee on the financial aspects of Corporate Governance. London: Gee Professional Publishing Ltd.
Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate Governance, board diversity, and firm value. The Financial Review, 38(1), 33–53.
Chen, L. J., Jung, C., & Chen, S. Y. (2011). How the pecking-order theory explain capital structure. The Journal of International Management Studies, 6(2), 92- 100.
Chitiavi, M. S., Musiega, M.G., Alala, O. B., Douglas, M., & Christopher, M. O. (2013). Capital structure and Corporate Governance practices: Evidence from listed non-financial firms on Nairobi Securities Exchange Kenya. IOSR Journal of Business and Management, 10(2), 8-16.
Deloitte Touche Tohmatsu India. (2015). Global trends in Corporate Governance. Retrieved from: https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/Corporate %20Governance/in-risk-global-trends-in-corporate-governance-4Dec2015- noexp.pdf
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Fama, E. F., French, K. R. (2002). Testing trade-off and pecking order predictions about dividends and debt. The Review of Financial Studies, 15(1), 1–33.
Farooq, U., Nazir, M. S., & Nawaz, M. M. (2012). Operating or financial distress? How much costly they are? American Journal of Scientific Research, 55(3), 96-108.
Ghazouani, T. (2013). The capital structure through the trade-off theory: Evidence from Tunisian firm. International Journal of Economics and Financial Issues, 3(3), 625-636.
Gill, A., Biger, N., Mand, H. S., & Shah, C. (2012). Corporate Governance and capital structure of small business service firms in India. International Journal of Economics and Finance, 4(8), 83-92.
Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics: McGraw-Hill International Edition (5th edition). New York, NY: McGraw-Hill Education.
Hafez, H. M. (2017). Corporate Governance practices and firm’s capital structure decisions: An empirical evidence of an emerging economy. Accounting and Finance Research, 6(4), 115-129.
Heng, T. B., Azrbaijani, S., & San, O. T. (2012). Board of Directors and capital structure: Evidence from leading Malaysian companies. Asian Social Science, 8(3), 123-136.
Hussain, M., Hassan, S., & Akmal, M. (2016). Effect of profitability and financial leverage on capital structure in Pakistan textile firms. Arabian Journal of Business and Management Review, 6(3), 1-4.
Hussainey, K., & Aljifri, K. (2012). Corporate Governance mechanism and capital structure in UAE. Journal of Applied Accounting Research, 13(2), 145-160.
Hussin, N., & Othman, R. (2012). Code of Corporate Governance and firm performance. British Journal of Economics, Finance and Management Sciences, 6(2), 1-22.
Jaradat, M. S. (2015). Corporate Governance practices and capital structure: A study with special reference to board size, board gender, outside director and CEO duality. International Journal of Economics, Commerce and Management, 3(5), 264-273.
Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48(3), 831-880.
Jensen, M. C., Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American economic review, 76(2), 323-329.
Kajananthan, R. (2012). Effect of Corporate Governance on capital structure: Case of the Sri Lanka listed manufacturing companies. Journal of Arts, Science & Commerce, 3(4), 63-71.
Karadeniz, E., Kand?r, S. Y., Iskenderoglu, O., & Onal, Y. B. (2011). Firm size and capital structure decisions: Evidence from Turkish lodging companies. International Journal of Economics and Financial Issues, 1(1), 1-11.
Kraus, A., & Litzenberger, R. H. (1973). A state?preference model of optimal financial leverage. The Journal of Finance, 28(4), 911-922.
Lipton, M., & Lorsch, J. W. (1992). A modest proposal for improved Corporate Governance. The Business Lawyer, 59-77.
Magdalena, R. (2012). Influence of Corporate Governance on capital structure decision: Evidence from Indonesian capital market. World Review of Business Research, 2(4), 37-49.
Minority Shareholder Watchdog Group. (2016). Annual report 2016: AdvocatingCorporate Governance.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48(3), 261-297.
Modugu, K. P. (2013). Capital structure decision: An overview. Journal of Finance and Bank Management, 1(1), 14-27.
Mostafa, H. T., & Boregowda, S. (2014). A brief review of capital structure theories.
Research Journal of Recent Sciences, 3(10), 113–118.
Muazeib, A. I., Chairiri, A., & Ghozali, I. (2015). Does Corporate Governance drive capital structure of Johannesburg listed companies? International Journal of Business, Economics and Law, 6(1), 23-34.
Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 575-592.
Myers, S. C. (2001). Capital structure. The Journal of Economic Perspectives, 15(2), 81-102.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221.
Norwani, N. M., Mohamad, Z. Z., & Chek, I. T. (2011). Corporate Governance failure and its impact on financial reporting within selected companies. International Journal of Business and Social Science, 2(21), 205-213.
Okiro, K., Aduda, J., & Omoro, N. (2015). The effect of Corporate Governance and capital structure on performance of firms listed at the East African Community Securities Exchange. European Scientific Journal, 11(7), 504 533.
Purag, M. B., Abdullah, A. B., & Bujang, I. (2016). Corporate Governance and capital structure of Malaysian family-owned companies. Journal of Business and Retail Management Research, 11(1), 18-30.
Rodrigues, S. V., Moura, H. J. D., Santos, D. F. L., Sobreiro, V. A. (2017). Capital structure management differences in Latin American and US firms after 2008 crisis. Journal of Economics, Finance and Administrative Science, 22(42), 51-74.
Rovers, M. (2013). Women on boards and company performance. Journal of Management and Governance, 17(2), 491-509.
Ruan, W., Tian, G., & Ma, S. (2011). Managerial ownership, capital structure and firm value: Evidence from China’s civilian-run firms. Australasian Accounting, Business and Finance Journal, 5(3), 73-92.
Sharma, A. (2014). Stress and Depression in Destitute and Normal Females. International Journal of Academic Research in Psychology, 1(1), 1–7.
Saad, N. M. (2010). Corporate Governance compliance and the effects to capital structure in Malaysia. International Journal of Economics and Finance, 2(1), 105-114.
Securities Commission Malaysia (2012). Malaysian code on Corporate Governance. Retrieved from: http://micg.org.my/upload/file/articles/11/CODE-CG- 2012.pdf
Securities Commission Malaysia (2017). Malaysian code on Corporate Governance. Retrieved from: https://www.sc.com.my/wp- content/uploads/eng/html/cg/mccg2017.pdf
Shafana, N. (2016). Board of directors’ characteristics impact on capital structure decisions: Evidence from top 50 turnover non-financial companies listed on the Colombo Stock Exchange. International Journal of Science and Research, 5(10), 79-86.
Singam, K. (2003). Corporate Governance in Malaysia. Bond Law Review. 15(1), 314-344.
Siromi, B., & Chandrapala, P. (2017). The effect of Corporate Governance on firms’ capital structure of listed companies in Sri Lanka. Journal of Competitiveness, 9(2), 19-33.
The, B. H., Azrbaijani, S., & Ong, T. S. (2012). Board of directors and capital structure: Evidence from leading Malaysian companies. Asian Social Science, 8(3), 123-136.
Uwuigbe, U. (2014). Corporate Governance and capital structure: Evidence from listed firms in Nigeria stock exchange. Journal of Accounting and Management, 4(1), 5-14.
Vakilifard, H. R., Gerayli, M. S., Yanesari, A. M., & Ma’atoofi, A. R. (2011). Effect of Corporate Governance on capital structure case of the Iranian listed firms. European Journal of Economics, Finance and Administrative Sciences, 35, 165-172.
Wang, L. H., & Kuo, H. C. (2008). The effects of Corporate Governance on capital structure in Taiwanese corporations after controlling the heterogeneity of industries and firm size. Corporate ownership of control, 6(1), 35-47.
Waworuntu, S. R., Anastasia, K., & Rusmanto, T. (2014). The effect of Corporate Governance in capital structure in public listed companies in Indonesia. Abstract of Emerging Trends in Scientific Research, 1, 243-258.
Wellalage, N. H., & Locke, S. (2012). Corporate Governance and capital structure decisions of Sri Lankan listed firms. Global Review of Business and Economic Research, 8 (1), 157-169.
Zabri, S. M., Yusoff, W. F. W., Ramin, A. K., & Ling, K. S. S. (2016). Corporate Governance practices and firm’s capital structure. International Business Management, 10(17), 3973-3981.
Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2010). Business research methods (8th edition). South Western: Cengage Learning.
In-Text Citation: (Md. Aris, 2021)
To Cite this Article: Md. Aris, N. B., Yusof, S. B. M., Xuan, K. Y., Zaidi, N. S. B., & Mohamed, A. S. B. (2021). Corporate Governance Practices and Capital Structure: Evidence from Malaysian Capital Market. International Journal of Academic Research in Busines and Social Sciences. 11(14), 71-94.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode