Abstract
Capital structure decision is about mixing debt and equity financing of a firm. This decision is vital to the firms’ overall operations and growth due to the need to maximize return that ultimately affect firm’s value. In the mean time, other factors and risks must also be considered when deciding a debt or equity financing. The main objective of this study is to investigate the relationship of liquidity, profitability, size of firm, interest coverage ratio and growth towards capital structure in communication and technology industry which focuses on the period of 2010–2015 on a quarterly basis. Ten companies are selected as a sample that contributes to the total samples of 240 observations. The dependent variable is capital structure (debt to equity ratio) while the independent variables are liquidity (current ratio), profitability (net profit margin), size of firm (total asset), interest coverage ratio and growth (sales). The multiple regression is applied towards the data in order to determine the relationship of capital structure in the industry. Thus, the findings stated that liquidity, interest coverage ratio and growth were found to have statistically significant negative relationships on debt to equity ratio, while size of firm and profitability were statistically significant and positive relationships.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Agha H (2015) Determinants of capital structure of cement sector in Pakistan. Euro Sci J May 11(13):ISSN 1857-7881, (Print) e ISSN 1857-7431
Asmawi NS, Faridah S (2013) The comparison of capital structure determinants between small and medium enterprises (SMEs) and large firms in Malaysia. Int J Econ Financ Stud 5(1):Online ISSN 1309-8055
Babalola Y (2014) Theoretical review of determinants of financial structure of firms in Nigeria: handbook on the emerging trends in scientific research, pp 202–206, ISSN 978-969-9347-16-0
Bennet M, Donnelly R (1993) The determinants of capital structure: some UK evidence. British Accounting Review, pp 43–59
Bradley M, Gregg AJ, Han EK (1984) On the existence of an optimal capital structure: theory and evidence. J Financ 39(3):857–878
Eriotis N, Vasiliou D, Ventoura-Neokosmidi Z (2007) How firm characteristics affect capital structure: an empirical study. Manag Financ 33(5):321–331
Ferri MG, Jones WH (1979) Determinants of financial structure: a new methodological approach. J Financ 34(3):631–644
Gleason KC, Mathur LK, Mathur I (2000) The interrelationship between cultures, capital structure, and performance: evidence from European retailers. J Bus Res 50:185–191
Harris M, Raviv A (1991) The theory of capital structure. J Financ XL VL(1):297–355
Hassan CH, Ying Y, Albaity M (2015) Dynamic capital structure in China: determinants and adjustment speed. Investment Manag Financ Innovations 12(2):195–204
Jensen M, Meckling W (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 2:305–360
Kouki M (2012) Capital structure determinants: new evidence from French panel data. Int J Bus Manag 7(1):214–229
Marsh P (1982) The choice between equity and debt: an empirical study. J Financ 37:121–144
Md-Yusuf M, Yunus FM, Supaat NZLM (2013) Determinants of capital structure in Malaysia electrical and electronic sector. Int J Econ Manage Eng 7(6):1514–1519
Modigliani F, Miller M (1958) The cost of capital, corporation finance and the theory on investment. Am Econ Rev 48(3):261–297
Modigliani F, Miller M (1963) Corporate income taxes and the cost of capital: a correction. Am Econ Rev 53:443–453
Morellec E (2001) Asset liquidity, capital structure, and secured debt. J Financ Econ 61(2):173–206
Myers SC (1977) Determinants of corporate borrowing. J Financ Econ 5:147–175
Myers SC (2001) Capital structure. J Econ Perspect 15(5):81–102
Myers SC, Majluf NS (1984) Corporate financing and investment decisions when firms have information that investors do not have. J Financ Econ 12:187–221
Olayinka A (2011) Determinants of capital structure: Evidence from Nigerian panel data. Afr Econ Bus Rev 9(1):ISSN 1109-5609
Rajan RG, Zingales L (1995) What do we know about capital structure: some evidence from international data. J Financ 50:1421–1460
Siti Salimah H, Sahibzada H, Hassan M (2015) The determinants of capital structure for Malaysian food producing companies. Int J Account Bus Manage 1(1):1–25. ISSN:2289-4519
Titman S (1984) The effect of capital structure on a firm’s liquidation decisions. J Financ Econ 13:137–151
Utami SR (2012) Determinants of capital structure of firms in the manufacturing sector of firms in Indonesia. Unpublished doctoral dissertation, Twente University, The Netherlands
Zuraidah A, Norhasniza MHA, Shashazrina R (2012) Capital structure effect on firms performance: focusing on consumers and industrials sectors on Malaysian firms. Int Rev Bus Res Papers 3(5):137–155
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Singapore Pte Ltd.
About this paper
Cite this paper
Ahmad, Z. et al. (2019). Capital Structure: Focusing on Communication and Technology Industry. In: Mohamad Noor, M., Ahmad, B., Ismail, M., Hashim, H., Abdullah Baharum, M. (eds) Proceedings of the Regional Conference on Science, Technology and Social Sciences (RCSTSS 2016) . Springer, Singapore. https://doi.org/10.1007/978-981-13-0203-9_27
Download citation
DOI: https://doi.org/10.1007/978-981-13-0203-9_27
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-0202-2
Online ISBN: 978-981-13-0203-9
eBook Packages: Social SciencesSocial Sciences (R0)