Determinants of Capital Structure in Small and Medium Enterprises in Malaysia: An Exploratory Factor Analysis

Abdullah, M. A., Manan, S. K. A., and Khadijah, S. (2011). Small and medium enterprises and their financing patterns: Evidence from Malaysia. Journal of Economic Cooperation and Development, 32(2), 1-18.
Abor, J., and Biekpe, N. (2007). Corporate governance, ownership structure and performance of SMEs in Ghana: implications for financing opportunities. Corporate Governance, 7(3), 288-300.
Annuar, M. N., and Shamsher, M. (1993). Earnings and dividend behaviour. Journal of Social Science and Humanities, 1(2), 171-177.
Baas, T., and Mechthild, S. (2006). Relationship banking and SMEs: a theoretical analysis. Small Business Economic, 27(2), 127-137.
Bajaj, Y., Kashiramka, S., & Singh, S. (2020). Capital structure dynamics: China and India (Chindia) perspective. European Business Review, 32(5), 845-868.
Balios, D., Daskalakis, N., Eriotis, N., and Vasiliou, D. (2016). SMEs capital structure determinants during severe economic crisis: The case of Greece. Cogent Economics & Finance, 4(1), 1145535.
Barton, S. L., and Paul J. G. (1988). Corporate strategy and capital structure. Strategic Management Journal, 9(6), 623-632.
Bell, K., and Vos, E. (2009). SME capital structure: the dominance of demand factors. In 22nd Australasian Finance and Banking Conference.
Berger, A. N., and Udell, G. F. (1998). The economics of small business finance: the roles of private equity and debt markets in the financial growth cycle. Journal of Banking and Finance, 22, 613-673.
Bhaird, C. M., and Lucey, B. (2010). Determinants of capital structure in Irish SMEs. Small Business Economics, 35, 357–375.
Bhole, L. M., and Mahakud, J. (2004). Trends and determinants of corporate capital structure in India: A panel data analysis. Finance India, 18, 37-56.
Booth, L., Aivazian, V., Kunt-Demirguc, A., and Maksimovic, V. (2001). Capital structure in developing countries. Journal of Finance, 56, 87–130.
Borgia, D., & Newman, A. (2012). The influence of managerial factors on the capital structure of small and medium?sized enterprises in emerging economies: Evidence from China. Journal of Chinese Entrepreneurship, 4 (3), 180-205.
Boyacigiller, N. A., and Adler, N. J. (1991). The parochial dinosaur: Organizational science in a global context. Academy of Management Review, 262-290.
Boyer, P., and Roth, H. (1978). The cost of equity finance for small business. American Journal of Small Business, 2(1), 1-11.
Breuer, W., and Salzmann, A. (2008). Cultural dimensions of corporate governance systems. Working Paper (available from SSRN).
Brighi, P., and Torluccio, G. (2007). Evidence on Funding Decisions by Italian SMEs: A Self-Selection Model. Available at SSRN 1629988.
Brislin, R. W. (1970). Back-translation for cross-cultural research. Journal of cross-cultural psychology, 1(3), 185-216.
Carter, D. A., Simkins, B. J., and Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial Review, 38(1), 33-53.
Castro, C., Desender, K. A., and Escamilla, S. (2007). Earnings management and shared cultural values, Working Paper: UAB Economia Empresa No. 8/01, Barcelona.
Cavusgil, S. T., and Zou, S. (1994). Marketing strategy-performance relationship: an investigation of the empirical link in export market ventures. The Journal of Marketing, 1-21.
Chaganti, R., DeCarolis, D., and Deeds, D. (1995). Predictors of capital structure in small ventures. Entrepreneurship Theory and Practice, 20, 7–18.
Changjiang, L., and Huibo, H. (2001). Empirical Study on the Capital Structure Characteristic of Listed Companies [J]. Nankai Business Review, 5, 26-29.
Charles, C., Sloan, M. F., & Butler, J. S. (2021). Capital structure determinants for arts nonprofits. Nonprofit Management and Leadership, 31(4), 761-782.
Chittenden, F., Hall, G., and Hutchinson, P. (1996). Small firm growth, access to capital markets and financial structure: Review of issues and an empirical investigation. Small Business Economics, 8, 56–67.
Chui, A. C. W., Lloyd, A. E., and Kwok, C. C. Y. (2002). The determination of capital structure: is national culture a missing piece to the puzzle? Journal of International Business Studies, 33(1), 99–127.
Clugston, M., Howell, J. P., and Dorfman, P. W. (2000). Does cultural socialization predict multiple bases and foci of commitment?. Journal of Management, 26(1), 5-30.
Cole, R. A. (1998). The importance of relationships to the availability of credit. Journal of Banking and Finance, 22(6), 959-977.
Coleman, S., and Carsky, M. (1999). Sources of capital for small family-owned businesses evidence from the national survey of small business finances. Family Business Review, 12(1), 73-84.
Covin, J., Slevin, D., and Heeley, M. (1999). Pioneers and followers: Competitive tactics, environment, and firm growth. Journal of Business Venturing, 15(2), 175-210.
Cressy, R., and Olofsson, C. (1997). The financial conditions for Swedish SMEs: Survey and research agenda. Small Business Economics, 9(2), 179-194.
Deesomsak, R., Paudyal, K., and Pescetto, G. (2004). The determinants of capital structure: evidence from the Asia Pacific region. Journal of Multinational Financial Management, 14(4/5), 387-405.
Delcoure, N. (2007). The determinants of capital structure in transitional economies. International Review of Economics and Finance, 16(3), 400-415.
Dewhurst, P., and Horobin, H. (1998). Small business owners. The management of small tourism and hospitality firms, Cassell, London, 19-38.
Di Patti, E. B., and Dell'Ariccia, G. (2004). Bank competition and firm creation. Journal of Money, Credit and Banking, 225-251.
Donaldson, G. (1961). Corporate Debt Capacity. Graduate School of Business Administration, Harvard University, Boston.
Donnelly, J. H., Berry, L. L., and Thompson, T. W. (1985). Marketing Financial Services: A Strategic Vision. Homewood, Illinois: Dow Jones-Irwin.
Fabowale, L., Orser, B., Riding, A., and Swift, C. (1994). Gender and banking with the small business client. Canadian Woman Studies, 15(1).
Fama, E. F., and Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Fattouh, B., Harris, L., and Scaramozzino, P. (2008). Non-linearity in the determinants of capital structure: evidence from UK firms. Empirical Economics, 34(3), 417-438.
Field A. (2005). Discovering Statistics Using SPSS, Zed edn, SAGE Publications Ltd, London.
Frank, M. Z., and Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important? Financial Management, 38(1), 1-37.
Friend, I., and Lang, L. (1988). An empirical test of the impact of managerial self-interest on corporate capital structure. Journal of Finance, 43, 271–281.
Gaud, P., Jani, E., Hoesli, M., and Bender, A. (2005). The capital structure of Swiss companies: an empirical analysis using dynamic panel data. European Financial Management, 11(1), 51-69.
Getz, D., and Carlsen, J. (2000). Characteristics and goals of family and owner-operated businesses in the rural tourism and hospitality sectors. Tourism management, 21(6), 547-560.
Gleason, K. C., Mathur, L. K., and Mathur, I. (2000). The interrelationship between culture, capital structure, and performance: evidence from European retailers. Journal of Business Research, 50(2), 185-191.
Greif, A. (1993). Contract enforceability and economic institutions in early trade: The Maghribi traders’ coalition. American Economic Review, 43, 491–519.
Hair, J. F., Black, W. C., Babin, B. J., and Anderson, R. E. (2010). Multivariate Data Analysis, seventh edition. Upper Saddle River, New Jersey: Prentice Hall.
Hamilton, R. T., & Fox, M. A. (1998). The financing preferences of small firm owners. International Journal of Entrepreneurial Behavior & Research.
Han, L., Fraser, S., and Storey, D. J. (2009). Are good or bad borrowers discouraged from applying for loans? Evidence from US small business credit markets. Journal of Banking and Finance, 33(2), 415-424.
Harris, M., and Raviv, A. (1991). The theory of capital structure. Journal of Finance, 46(1), 297-355.
Hatzinikolaou, D., Katsimbris, G. M., and Noulas, A. G. (2002). Inflation uncertainty and capital structure: Evidence from a pooled sample of the Dow-Jones industrial firms. International Review of Economics and Finance, 11(1), 45-55.
Hirshleifer, D., and Thakor, A. V. (1989). Managerial reputation, project choice and debt. Working paper No.14-89, Anderson Gradute School of Management at UCLA.
Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Beverly Hills, Cal., and London: Sage.
Hofstede, G., Hofstede, G. J., and Michael, M. (1991). Cultures and organizations. London: McGraw-Hill.
Holmlund, M. (1997). What are relationships in business networks? Management decision, 35(4), 304-309.
Hood, C. (2000). The art of the state: Culture, rhetoric, and public management. Oxford University Press, USA.
Huang, W., Boateng, A., and Newman, A. (2016). Capital structure of Chinese listed SMEs: an agency theory perspective. Small Business Economics, 47(2), 535-550.
Hussain, J., and Matlay, H. (2007). Financing preferences of ethnic minority owner/managers in the UK. Journal of Small Business and Enterprise Development, 14(3), 487-500.
Ibrahim, H., and Masron, T. A. (2011). Capital Structure and the Firm Determinants: Evidence from Small and Medium Enterprises (SMEs) in Malaysia. In International Conference on Economics, Trade and Development.
Jensen M., and Meckling W. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.
Jõeveer, K. (2013). Firm, country and macroeconomic determinants of capital structure: Evidence from transition economies. Journal of Comparative Economics, 41(1), 294-308.
Kaiser, H. F. (1974). An index of factorial simplicity. Psychometrika, 39(1), 31-36.
Kila, S. M., and Mahmood, W. M. W. (2008). Capital Structure and Firm Characteristics: Some Evidence from Malaysian Companies. University Teknologi MARA, Malaysia.
Korajczyk, R. A., and Levy, A. (2003). Capital structure choice: macroeconomic conditions and financial constraints. Journal of Financial Economics, 68(1), 75-109.
Krishnan, V. S., and Moyer, R. C. (1997). Performance, capital structure and home country: An analysis of Asian corporations. Global Finance Journal, 8(1), 129.
Kumar, S., Sureka, R., & Colombage, S. (2020). Capital structure of SMEs: a systematic literature review and bibliometric analysis. Management Review Quarterly, 70(4), 535-565.
Kusi, B. A., Dzeha, G., Gyan, K. K., & Turkson, F. E. (2021). Debt capital structure and credit information sharing: Evidence on listed firms from an emerging market. Journal of African Business, 22(2), 153-170.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113-55.
Li, K., Griffin, D., Yue, H., and Zhao, L. (2011). National culture and capital structure decisions: Evidence from foreign joint ventures in China. Journal of International Business Studies, 42(4), 477-503.
Licht, A. N. (2001). The mother of all path dependencies: Toward a cross-culture theory of corporate governance systems. Delaware Journal of Corporate Law, 26, 147-205.
Lopez-Gracia, J., and Sanchez-Andujar S. (2007). Financial structure of the family business: Evidence from a group of small Spanish firms. Family Business Review, 20, 269.
Lynch, P. (1999). Host attitudes towards guests in the homestay sector. Tourism and Hospitality Research, 1(2), 119-144.
Mat Nawi, H. (2015). Determinants of capital structure in small and medium sized enterprises in Malaysia (Doctoral dissertation, Brunel University London).
McMahon, R. G., and Stanger, A. M. (1995). Understanding the small enterprise financial objective function. Entrepreneurship Theory and Practice, 19, 21-40.
McMillan, J., and Woodruff, C. (1999). Interfirm relationships and informal credit in Vietnam. Journal of Economics, November, 1285–320.
Menon, A., Bharadwaj, S. G., and Howell, R. (1996). The quality and effectiveness of marketing strategy: Effects of functional and dysfunctional conflict in intraorganizational relationships. Journal of the Academy of Marketing Science, 24(4), 299-313.
Michaelas, N., Chittenden, F., and Poutziouris, P. (1998). A model of capital structure decision making in small firms. Journal of Small Business and Enterprise Development, 5(3), 246-260.
Michaelas, N., Chittenden, F., & Poutziouris, P. (1999). Financial policy and capital structure choice in UK SMEs: Empirical evidence from company panel data. Small Business Economics, 12(2), 113-130.
Modigliani, F., and Miller, M. H. (1958). The cost of capital, corporate finance, and the theory of investment. American Economic Review, 48, 261–75.
Modigliani, F., and Miller, M. H. (1963). Corporate income taxes and the cost of capital: a correction. American Economic Review, 53(3): 433-443.
Mohamad, M. H. (1995). Capital structure in large Malaysian companies. MIR: Management International Review, 119-130.
Morrison, A. (2006). A contextualisation of entrepreneurship. International Journal of Entrepreneurial Behavior & Research, 12(4), 192-209.
Moro, A. L., Michael, G. U., and Grassi, E. (2010). Financing SMEs: a model for optimising the capital structure. In: 17th Annual Global Finance Conference, 27-30 June 2010, Poznan.
Mullen, M. R. (1995). Diagnosing measurement equivalence in cross-national research. Journal of International Business Studies, 3rd quarter, 573-96.
Mutenheri, E., and Green, C. (2002). Financial reform and financing decisions of listed firms in Zimbabwe. University of Manchester, Institute for Development Policy and Management.
Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147-175.
Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 575-592.
Myers, S. C., and Majluf, N. (1984). Corporate financing and investment decision when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221.
Naman, J. L., and Slevin, D. P. (1993). Entrepreneurship and the concept of fit: A model and empirical tests. Strategic Management Journal, 14(2), 137-153.
Nawi, H. M. (2017). A Qualitative Study to Discover the Determinants of Capital Structure of Micro and Small-sized Enterprises in Malaysia. International Journal of Arts and Commerce, 6(8), 70-87.
Nawi, H. M. (2018). Measuring Capital Structure Determinants of Small and Medium Enterprises (SMEs): An Assessment of Construct Reliability and Validity of a Proposed Questionnaire. Canadian Social Science, 14(2), 44-58.
Newman, A., Gunessee, S., and Hilton, B. (2012). Applicability of financial theories of capital structure to the Chinese cultural context: A study of privately owned SMEs. International Small Business Journal, 30(1), 65-83.
Nguyen, T. D. K., and Ramachandran, N. (2006). Capital structure in small and medium-sized enterprises: The case of Vietnam. ASEAN Economic Bulletin, 23(2), 192-211.
Norton, E. (1990). Similarities and differences in small and large corporation beliefs about capital structure policy. Small Business Economics, 2, 229-245.
Nunnally, J. C. (1978). Psychometric Theory. (2nd ed.). New York: McGraw-Hill.
Nunnally, J. C., and Bernstein, I. H. (1994). Psychometric Theory (3rd ed.). New York, McGraw Hill.
Nwankwo, S., and Lindridge, A. (1998). Marketing to ethnic minorities in Britain. Journal of Marketing Practice: Applied Marketing Science, 4(7), 200-216.
Onaolapo, A. A., Kajola, S. O., and Nwidobie, M. B. (2015). Determinants of capital structure: A study of Nigerian quoted companies. methodology, 7(23).
Ou, C., and Haynes, G. W. (2006). Acquisition of additional equity capital by small firms—Findings from the national survey of small business finances. Small Business Economics, 27, 157–168.
Pallant, J. (2001). SPSS Survival Manual: A Step by Step Guide to Data Analysis Using SPSS. Buckingham: Open University.
Parsons, C., and Titman, S. (2007). Capital structure and corporate strategy. Available at SSRN 983553.
Peel, M. J., and Wilson, N. (1996). Working capital and financial management practices in the small firm sector. International Small Business Journal, 14(2), 52-68.
Peng, T. K., Peterson, M. F., and Shyi, Y. P. (1991). Quantitative methods in cross-cultural management research: Trends and equivalence issues. Journal of Organizational Behaviour, 12, 87-108.
Petersen, M. A., and Rajan, R. G. (2002). Does distance still matter? The information revolution in small business lending. The Journal of Finance, 57(6), 2533-2570.
Petersen, M. A., and Rajan, R. G. (1994). The benefits of lending relationships: Evidence from small business data. Journal of Finance, 49, 3–37.
Philip, K. (1999). Kotler on marketing: How to create, win, and dominate markets. Simon and Schuster UK.
Rajan, G. R., and Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. Journal of Finance, 50, 1421–60.
Robb, A. M., and Fairlie, R. W. (2007). Access to financial capital among U.S business: The case of African American firms. The ANNALS of the American Academy of Political and Social Science, 613, 47-72.
Romano, C. A., Tanewski, G. A., and Smyrniosm K. X. (2001). Capital structure decision making: a model for family business. Journal of Business Venturing, 16, 285-310.
Rozali, M. B., Taib, H., Latiff, R. A., and Salim, M. (2006). Small Firms’ Demand for Finance in Malaysia. In Proceeding of International Conference on Business and Information (BAI) July, 12-14.
Saito, K., and Villanueva, D. (1981). Transactions costs of credit to the small-scale sector in the Philippines. Economic Development and Cultural Change, 29, 3.
Schwartz, S. H. (1994). Beyond individualism/collectivism: new cultural dimensions of values, in "Individualism and collectivism: theory, method and application", Kim and al. editors, Newbury Park: Sage.
Scott, A. J. (2006). Entrepreneurship, innovation and industrial development: geography and the creative field revisited. Small Business Economics, 26, 1?24.
Sener, R. (1989). An empirical test of the de angelo-masulis tax shield and tax rate hypotheses with industry and inflation effects. Journal of Business, Mid-Atlantic, 26.
Shah, A., and Khan, S. (2007). Determinants of capital structure: Evidence from Pakistani panel data. International Review of Business Research Papers, 3(4), 265-282.
Shao, L., Kwok, C. C., and Guedhami, O. (2009). National culture and dividend policy. Journal of International Business Studies, 41(8), 1391-1414.
Siegel, J., Licht, A., Schwartz, S. (2007). Egalitarianism and international investment, Working Paper: SSRN, Cambridge/Jerusalem.
Smallbone, D., Ram, M., Eakins, D., and Baldock, R. (2003). Access to Finance by Ethnic Minority Businesses in the UK. International Small Business Journal, 21(3), 291-314.
SME Corporation Malaysia. (2020). SME Annual Report 2018/2019. Retrieved from https://www.smecorp.gov.my/images/SMEAR/SMEAR2018_2019/final/english/SME%20AR%20- %20English%20-%20All%20Chapter%20Final%2024Jan2020.pdf
SME Annual Report 2007. [Online] Available from
http://www.bnm.gov.my/files/publication/sme/en/2007/chap_7.pdf [Accessed 19 October 2009].
Smyrnios, K. X., and Dana, L. (2006). The MGI Family and Private Business Survey. Melbourne: RMIT University.
Sogorb-Mira, F. (2005). How SME uniqueness affects capital structure: Evidence from a 1994–1998 Spanish data panel. Small Business Economics, 25(5), 447–457.
Storey, D. J. (1994). Understanding the Small Business Sector. Routledge.
Taggart, J. R. A. (1995). Secular patterns in the financing of U.S corporations. In Friedman, B.M. Corporate capital structures in the United States, University of Chicago Press, 13-80.
Titman, S., and Wessels, R. (1988). The determinants of capital structure choice. Journal of Finance, 43, 1–19.
Vos, E., Yeh, A. J., Carter, S., and Tagg, S. (2007). The happy story of small business financing. Journal of Banking and Finance, 31, 2648-2672.
Ward, J. M. (1987). Integrating information systems into business strategies. Long range planning, 20(3), 19-29.
Wiwattanakantang, Y. (1999). An empirical study on the determinants of the capital structure of Thai firms. Pacific-Basin Finance Journal, 7, 371-403.
Yeung, I. Y., and Tung, R. L. (1996). Achieving business success in Confucian societies: The importance of Guanxi (Connections). Organizational Dynamics.
Zunckel, S., & Nyide, C. J. (2019). Capital structure of small, medium and micro enterprises: major factors for a developing economy. Problems and Perspectives in Management, 17(2), 124-133.

In-Text Citation: (Nawi et al., 2022)
To Cite this Article: Nawi, H. M., Zulkefle, W. N. S. A., & Siong, O. H. (2022). Determinants of Capital Structure in Small and Medium Enterprises in Malaysia: An Exploratory Factor Analysis. International Journal of Academic Research in Business and Social Sciences, 12(10), 846– 869.

Copyright: © 2022 The Author(s)
Published by Knowledge Words Publications (www.kwpublications.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode