The determinants of capital structure: Evidence from selected ASEAN countries

Abstract

Corporate structure is an important research area in corporate finance and it remains the core of literature studies for academicians. However studies had focused on firms in developed countries and little attention on how firms in developing and emerging market decide on their capital structure strategy. Therefore this study attempts to fill the gap by analyzing the capital structure for listed firms in the ASEAN region. The sample comprises 155 listed companies from four selected ASEAN main stock exchange index-links components for the period from 2003 to 2007. The study found profitability and growth opportunities for all selected ASEAN countries exhibit statistical significant of inverse relationship with leverage whereas non-debt tax shield has significant negative impact on leverage as for Malaysia index link companies only. Firm size gave a positive significant relationship for Indonesia and Philippine index link companies. As for the four country-effect factors; stock market capitalization and GDP growth rate show significant relationship with leverage while bank size and inflation indicate insignificant impacts on leverage.