Board Characteristics and Capital Structure of Malaysia Consumer Products Sector

Abstract

This study investigated the relationship between board characteristics and capital structure, namely total debt, short-term debt, and long-term debt of firms in the Malaysian consumer products sector for the period 2010 to 2014. Based on 109 firms selected for the study, the firms’ decision about capital structure regardless of total debt, short-term debt or long-term debt is not influenced by the size of the board. However, if the board membership constitutes more independent directors, the proportion of short-term debt is even higher than the long term-debt. Board meetings were found to have a significantly negative influence on firms’ decisions concerning total debt financing. The findings also revealed that large firms hold more short-term and long-term debts when there is an increase in the number of members on the board. The firms that have been long in existence focused more on short-term debt financing and their growth in terms of capital expenditure. Consequently, the total debt of the firms also increased.

Determinants of the Capital Structure of European Firms: The Moderating Role of Efsf/Esm Financial Assistance Programs

“…Higher profitability leads to higher taxes, thus motivating firms to increase their debt (Ebrahim et al, 2014;Rahim et al, 2020). Similarly, larger firms and firms with more tangible assets would face a lower level of financial distress risk due to the higher level of diversification and lower cost of information asymmetry, which in turn, would encourage them to expand their debt levels (Chen, 2004;Cortez & Susanto, 2012;Chin & Zakaria, 2018). Finally, as a result of the positive relationship between tax rates and debt tax shield, there would be a positive relationship between tax rates and financial leverage (Modigliani & Miller, 1963).…”