relationship between factors of capital structure
CHAPTER 1
INTRODUCTION
1.0 CHAPTER OVERVIEW
Capital plays an important role in business. Every business enterprise, whether big, medium or small, manufacturing, services or industrial, needs capital to carry on its operations smoothly and to achieve its targets organization’s objective. Capital Structure means how an organization or company manage their capital or obtain financial resources to manage their business well. Business adopts different types of capital structures in order to meet the internal needs and an external need which is satisfying the shareholders. In order to make a decision about the capital structures, several factors need to been consider in making a good decision for the company. There are a lot of factors that related in determinants of capital structure. This study refers for the determinants of capital structure in manufacturing company which been carried out in Malaysia.
The issues of determinants of capital structure had been explained by several capital structure theories. There are Modigliani–Miller theory (M&M theory), trade off theory, agency theory and pecking order theory. Furthermore, the factors that influence the capital structure had been debated for a long time until now. There’s a number of researchers had been research and carried out this issues for over the years. However, all the research been done did not give the satisfactory answers towards this issues.
In additional, this research chooses January 1999 to December 2009 to observe the determinants of capital structure of manufacturing company in Malaysia. Therefore, this research use data stream to find the balance sheet and income statement of the listed manufacturing company in Malaysia.
1.1 BACKGROUND OF STUDY
The background of the study is about the relationship between several factors of organization with the firm’s choice of capital structure. The several factors include size of firms, growth opportunity, profitability, sales growth, liquidity of
INTRODUCTION
1.0 CHAPTER OVERVIEW
Capital plays an important role in business. Every business enterprise, whether big, medium or small, manufacturing, services or industrial, needs capital to carry on its operations smoothly and to achieve its targets organization’s objective. Capital Structure means how an organization or company manage their capital or obtain financial resources to manage their business well. Business adopts different types of capital structures in order to meet the internal needs and an external need which is satisfying the shareholders. In order to make a decision about the capital structures, several factors need to been consider in making a good decision for the company. There are a lot of factors that related in determinants of capital structure. This study refers for the determinants of capital structure in manufacturing company which been carried out in Malaysia.
The issues of determinants of capital structure had been explained by several capital structure theories. There are Modigliani–Miller theory (M&M theory), trade off theory, agency theory and pecking order theory. Furthermore, the factors that influence the capital structure had been debated for a long time until now. There’s a number of researchers had been research and carried out this issues for over the years. However, all the research been done did not give the satisfactory answers towards this issues.
In additional, this research chooses January 1999 to December 2009 to observe the determinants of capital structure of manufacturing company in Malaysia. Therefore, this research use data stream to find the balance sheet and income statement of the listed manufacturing company in Malaysia.
1.1 BACKGROUND OF STUDY
The background of the study is about the relationship between several factors of organization with the firm’s choice of capital structure. The several factors include size of firms, growth opportunity, profitability, sales growth, liquidity of