Firms’ speed of adjustment and rational financing behaviour: Malaysian evidence

Haron, Razali (2014) Firms’ speed of adjustment and rational financing behaviour: Malaysian evidence. Journal for Global Business Advancement, 7 (2). pp. 151-162. ISSN 1746-9678 (O, 1746-966X (P)

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Abstract

Malaysian firms which are examined based on a dynamic framework appear to practice target capital structure and take into account certain firm characteristics in their capital structure decisions. These firms readjust instantaneously when they are off the target indicating low adjustment cost while the pecking order hypothesis seems to influence the financing decisions. Found to be over-levered most firms behave rationally by cutting down the amount of debt in their capital structure to reach the target. In terms of the proximity to the target, under-levered firms are found to be much closer to target than over-levered firms. This study contributes to the literature by identifying the rational financing behaviour and the proximity of Malaysian firms to target leverage. This indication of firms’ proximity to target can help managers to outline and set the next steps to be taken in order to reach the target capital structure to maximise firm value.

Item Type:	Article (Journal)
Additional Information:	4581/32530
Uncontrolled Keywords:	speed of adjustment; dynamic m odel; firms’ rational financing behaviour; Malaysia
Subjects:	H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance.
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Finance
Depositing User:	Dr. Razali Haron
Date Deposited:	18 Dec 2013 13:00
Last Modified:	17 Nov 2014 11:07
URI:	http://irep.iium.edu.my/id/eprint/32530

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