Yao Yuan, S. M. Ferdous Azam, Jacquline Tham


In this research, SME business owners, top management, shareholders and financial managers are recommended and additionally implicit that they have direct involvement in the financial decision making of the respective enterprise, specifically in selecting debt or equity financing options. The design of the sampling technique is depicted trailed by the discussion of research instrument development. The sample size of a total of 210 respondents who met the predefined characteristics to contribute the insightful information related to corporate finance among SMEs in Malaysia. The findings revealed that a positive relationship exists between productivity and enterprise performance, as well as between enterprise size and enterprise performance. Likewise, there is a positive relationship between enterprise expansion and enterprise performance, as well as enterprise age and enterprise performance. Finally, a positive relationship has been identified between asset tangibility and enterprise performance. This study implies a new research framework consists of enterprise productivity, enterprise age and growth, working capital, enterprise size and asset tangibility as the determinant of capital structure decisions towards enterprise performance.


JEL: L10, L20, P12, D24


Article visualizations:

Hit counter



capital structure decisions, enterprise performance, small and medium size enterprises (SMEs), Malaysia

Full Text:



Al Shehhi and Azam, S. M. F. (2019a). Total Quality Management and Project Management towards Organisational Success of Agriculture and Fisheries in Sultanate of Oman: A Measurement Model, European Journal of Management and Marketing Studies, 4 (1): 1-17.

Al Shehhi and Azam, S. M. F. (2019b). Developing and Validating the TQM Framework in the Sultanate of Oman Agriculture and Fisheries Context, European Journal of Economic and Financial Research, 3(4): 30-42.

Al Shehhi and Azam, S. M. F. (2019c). Measuring the Mediating Role of Project Management between Total Quality Management and Organisational Success in Sultanate of Oman, European Journal of Human Resource Management Studies, 2(2): 45-58.

Alani, M. K., & Alamri, M. S. (2015). The determinants of capital structure: an empirical study of Omani listed industrial companies. Business: Theory and Practice, 16(2), 159- 167.

Alipour, M., Mohammadi, M. F. S., & Derakhshan, H. (2015). Determinants of capital structure: an empirical study of enterprises in Iran. International Journal of Law and Management, Vol. 57 Issue: 1, pp.53-83.

Arnold, G. (2013). Corporate financial management. Fifth edition. Financial Times Prentice Hall, Harlow.

Azam, S. M. F. and Moha Asri A. (2015). Differential Roles between Owner and Manager in Financial Practice That Contributes to Business Success: An Analysis on Malaysian Small Business, Academic Journal of Interdisciplinary Studies, 4 (1 S2): 123-134.

Azam, S. M. F., Haque, A., Sarwar, A. and Anwar, N. (2014), Training Program Effectiveness of Service Initiators: Measuring Perception of Female Employees of Bank Using Logistic Approach, Asian Research Journal of Business Management, 1 (2): 98-108.

Baker, M., & Wurgler, J., (2002). Market timing and capital structure. The Journal of Finance, 57, 1-30.

Bennett, D., Richardson, P. & Nyauncho, E. (2015). Understanding the SME customer. Nairobi, Kenya: FSD, Kenya.

Bernard, H. R., (2002). Research Methods in Anthropology: Qualitative and quantitative methods. 3rd edition. AltaMira Press, Walnut Creek, California.

Chong, P. L., Ong, T. S., Abdullah, A. and Choo, W. C. (2019). Internationalisation and Innovation on Balanced Scorecard (BSC) among Malaysian Small and Medium Enterprises (SMEs), Management Science Letters, 9(10): 1617–1632.

De Silva, A. D. A., Khatibi, A. and Azam, S. M. F. (2017). Do the Demographic Differences Manifest in Motivation to Learn Science and Impact on Science Performance? Evidence from Sri Lanka, International Journal of Science and Mathematics Education, 16(S1), 47–67.

Dewi, N., Azam, S. M. F. and Yusoff, S. K. M. (2019). Factors influencing the information quality of local government financial statement and financial accountability, Management Science Letters, 9 (9): 1373-1384.

Edinburgh Group. (2012). Growth of the global economy through SMEs. Retrieved from http://www.edinburghroup.org/media/2776/edinburgh_group_research_- _growing_the_global_economy_through_smes.pdf.

Edward & Khawari (2018, July 8). GST has not helped, says SME association. Malay Mail Online. Retrieved from http://www.themalaymailonline.com/.

Fagan, M. & Zhao, S. (2009). SME financing in China: The current situation, problems and possible solutions. International Journal of Entrepreneurship and Small Business, 8(2), 171-185.

Fama E., & French K. (2002). Testing trade-off and pecking order predictions about dividends and debt. Review of Financial Studies, 15, 1-33.

Fama E., & French K. (2005). The anatomy of value and growth returns, working paper, University of Chicago.

Fama, E. F., & Miller, M.H. (1972). The theory of finance. New York: Holt, Rinehart and Winston.

Farhan, I. M., Khaled, M., & Avijit, H. (2018). Determinants of Capital Structure and Testing of Applicable Theories: Evidence from Pharmaceutical Enterprises of Bangladesh. International Journal of Economics and Finance, Vol. 8, 3.

Fernando, W. H. M., Yusoff, S. K. M, Khatibi, A. and Azam S. M. F. (2019). A Review on Human Capital; Two Principal Ideas Predominantly Generic Human Capital and Specific Human Capital for Organizational Performance. European Journal of Economic and Financial Research, 3(5): 35-47.

Field, A. P. (2009). Discovering statistics using SPSS. London, England: SAGE.

Frank, M. Z., & Goyal, V. K. (2009). Capital structure decisions: Which factors are reliably important? Financial Management, 38(1), 1-37.

George, D., & Mallery, P., (2003). SPSS for Windows step by step: A simple guide and reference 11.0 update. 4th Edition. Boston: Allyn & Bacon.

Gunasinghe, A., Hamid, J. A., Khatibi, A. and Azam S. M. F. (2019). Academicians’ Acceptance of Online Learning Environments: A Review of Information System Theories and Models. Global Journal of Computer Science and Technology, 19 (1-H): 30-39.

Gurcharan, S., (2010). A Review of Optimal Capital Structure Determinant of Selected ASEAN Countries. International Research Journal of Finance and Economics, Issue 47, pp. 30- 41.

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate Data.

Hair, J. F., Money, H. A., Samouel, P. & Page, M. (2007). Research Methods for Business. England, John Wiley and Sons Ltd.

Hamilton, R. T., & Fox, M. A. (1998). The financing preferences of small enterprise owners. International Journal of Entrepreneurial Behavior and Research, 4(3), 239–248.

Haque A., Sarwar, A., Azam, S. M. F. and Yasmin, F. (2014). Total Quality Management Practices in the Islamic Banking Industry: Comparison between Bangladesh and Malaysian Islamic Bank, International Journal of Ethics in Social Sciences, 2 (1): 5-18.

Haur, C. H., Khatibi, A. and Azam, S. M. F. (2017). Antecedents of Consumers’ Perception towards Online Advertising in Malaysia: The Structure Equation Modeling Approach, European Journal of Management and Marketing Studies, 2 (3): 15-30.

Holmes S. & Kent P. (1991). An empirical analysis of the financial structure of small and large Australian manufacturing enterprises. The Journal of Small Business Finance. 1(2): 141-54.

Ibrahim, H., & Masron, T. A., (2011). Capital structure and the enterprise determinants: Evidence from Small and Medium Enterprises (SMEs) in Malaysia. International Proceedings of Economics Development and Research, 7.

Jamal, A. A., Geetha, C., Mohidin, R., Karim, A. M. R., Lim, T.S., & Ch’ng, V. (2013). Capital Structure Decisions: Evidence from Large Capitalized Companies in Malaysia. Interdisciplinary Journal of Contemporary Research in Business, 5(5).

Jayasuriya, N. A. and Azam, S. M. F. (2017). International Review of Management and Marketing, 7(5), 178-183.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the enterprise: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

Jensen, M. (1986). Agency costs of free cash flow, corporate finance and takeovers. American Economic Review, 76(2), 323 -339.

Kanapathipillai, K. and Azam S. M. F. (2019). A Conceptual Understanding of the Critical Factors That Induce Women Entrepreneurial Success in the Klang Valley, Malaysia, European Journal of Management and Marketing Studies, 4(2): 90-110.

Katukurunda, K. G. W. K., Yajid, S. M. A, Khatibi, A. and Azam, S. M. F. (2019). Students’ Satisfaction towards Biosystems Technology; Does Programme Quality Matters? (Evidence from Sri Lankan Perspectives), European Journal of Open Education and E-learning Studies, 3 (2): 174-190.

Korajczyk, R. A., & Amnon, L. (2003). Capital structure choice: Macroeconomic conditions and financial constraints. Journal of Financial Economics, 68, 75.

Kothari, C. R. (2004). Research Methodology: Methods and Techniques. 2nd Edition, New Age International Publishers, New Delhi.

Kraus, A & Litzenberger (1973). A state preference model of optimal financial leverage. Journal of Finance. 28. 911-22.

Krishnan, V. S., & Moyer, R. C., (1996). Determinants of capital structure: An empirical analysis of enterprises in industrialized countries. Managerial Finance, 22(2), 39-55.

Kuruwitaarachchi, N., Yajid, S. M. A, Khatibi, A. and Azam, S. M. F. (2019). Enhance the use of Internet Based Advanced Communication Technologies in Small and Medium Scale Enterprises in Sri Lanka, European Journal of Social Sciences Studies, 3 (2): 44-57.

Lewis, J. L. & S. R. J. Sheppard. (2006). Culture and communication: can landscape visualization improve forest management consultation with indigenous communities?. Landscape and Urban Planning, 77, 291–313.

Lisboa, I. (2017). The capital structure of exporter SMEs during the financial crisis: evidence from Portugal. European Journal of Management Studies, 22(1):25-49.

Maghfuriyah, A., Azam, S. M. F. and Shukri, S. (2019). Market Structure and Islamic Banking Performance in Indonesia: An Error Correction Model, Management Science Letters, 9 (9): 1407-1418.

Mota, J. H. F. & Moreira, A. C. (2017). Determinants of the capital structure of Portuguese enterprises with investments in Angola. South African Journal of Economic and Management Sciences, 20(1).

Nguyen, H. N., Tham, J., Khatibi, A. and Azam, S. M. F. (2019). Enhancing the Capacity of Tax Authorities and its Impact on Transfer Pricing Activities of FDI Enterprises in Ha Noi, Ho Chi Minh, Dong Nai, and Binh Duong Province of Vietnam, Management Science Letters, 9 (8): 1299-1310.

Noe, T., (1988). Capital Structure and signalling game equilibria. Review of Financial Studies, 1, pp. 331- 356.

Normah, M. A., (2006). SMEs: Building Blocks for Economic Growth. In the National Statistics Conference, Department of Statistics, Malaysia, 4-5 September 2006.

Norton, E., (1990). Similarities and differences in small and large corporation beliefs about capital structure policy. Small Business Economics, 2, 229-245.

Norton, E., (1991). Capital structure and small growth enterprises. The Journal of Entrepreneurial Finance, 1(2), 161-177.

Pallant, J., (2011). SPSS survival manual: A step by step guide to data analysis using SPSS. McGraw- Hill International.

Pambreni, Y., Khatibi, A., Azam, S. M. F. and Tham, J. (2019). The Influence of Total Quality Management toward Organization Performance, Management Science Letters, 9 (9): 1397-1406.

Paul, S., Whittam, G., & Wyper, J. (2007). The pecking order hypothesis: Does it apply to start-up enterprises?. Journal of Small Business and Enterprise Development, vol. 14, no.1, pp.8- 21.

Presser, J. & Blair, J. (1994). Survey Pretesting: Do Different Methods Produce Different Results?. Sociological Methodology, Vol. 24, Washington, DC: American Sociological Association, pp. 73-104.

Pushpakumara, W. D. H., Atan, H., Khatib, A., Azam, S. M. F. and Tham, J. (2019). Developing a Framework for Scrutinizing Strategic Green Orientation and Organizational Performance with Relevance to the Sustainability of Tourism Industry, European Journal of Social Sciences Studies, 4 (3): 1-18.

Qayyum, S., (2013). Determinants of capital structure: an empirical study of cement industry of Pakistan, Interdisciplinary Journal of Contemporary Research in Business, 24(11), 784–795.

Rachmawati, D., Shukri, S., Azam, S. M. F. and Khatibi, A. (2019). Factors Influencing Customers’ Purchase Decision of Residential Property in Selangor, Malaysia, Management Science Letters, 9 (9): 1341-1348.

Rajan, R.G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. Journal of Finance, 50(5), 1421-1460.

Sekaran, U. & Bougie, R. (2018). Research Methods for Business: A Skill Building Approach. 7th Ed., New York, John Wiley & Sons Ltd.

Shyam-Sunder, L., & Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51, 219-244.

Siddik, M.N.A., Kabiraj, S., & Joghee, S. (2017). Impacts of Capital Structure on Performance of Banks in a Developing Economy: Evidence from Bangladesh. International Journal of Financial Study, 2017, 5, 13.

SME Corp. Malaysia. (2018). Guideline book for new SME definition. Retrieved from http://www.smecorp.gov.my/images/pdf/Guideline_New_SME_Definition_up dated.pdf.

Smith C. W., & Stulz R. N. (1985). The determinants of enterprises’ hedging policies. Journal of Financial and Quantitative Analysis, (20), 391-405.

Smith, C. N. & Dainty, P. (1991). The Management Research Handbook. Routledge, London, UK.

Tao, D., Tham, J. and Azam S. M. F. (2019). Voluntary Community Service Effectiveness among College Students in Tongren University, China. European Journal of Social Science Studies, 4(4): 156-173.

Tarofder, A. K. and Azam, S. M. F. and Jalal, A. N. (2017). Operational or Strategic Benefits: Empirical Investigation of Internet Adoption in Supply Chain Management, Management Research Review, 40 (1): 28-52.

Tarofder, A. K., Haque, A., Hashim, N., Azam, S. M. F. and Sherief, S. R. (2019). Impact of Ecological Factors on Nationwide Supply Chain Performance, Ekoloji, 28(107): 695-704.

Tham, J., Yazid, M. S. A, Khatibi, A. A. and Azam, S. M. F. (2017). Internet and Data Security – Understanding Customer Perception on Trusting Virtual Banking Security in Malaysia, European Journal of Social Sciences Studies, 2 (7): 186-207.

Ting, I. W. K., & Lean, H. H. (2011). The capital structure of government-linked companies in Malaysia. Asian Academy of Management Journal of Accounting and Finance. 7(2). pp. 137–156.

Tucker, J., & Lean, J., (2003). Small enterprise finance and public policy. Journal of Small Business and Enterprise Development, 10(1), 50-61.

Udriyah, U., Tham, J. and Azam, S. M. F. (2019). The Effects of Market Orientation and Innovation on Competitive Advantage and Business Performance of Textile SMEs, Management Science Letters, 9 (9): 1419-1428.

Viviani, J. L., (2008). Capital structure determinants: an empirical study of French companies in the wine industry. International Journal of Wine Business Research, vol. 20, no. 2, pp. 171-194.

Wheeler, D.J., (2011). Problems with Skewness and Kurtosis, Part One. Retrieved from http://www.qualitydigest.com/inside/quality-insiderarticle/problems-skewness- and-kurtosis-part-one.html

Wheeler, D.J., (2011). Problems with Skewness and Kurtosis, Part Two. Retrieved from http://www.qualitydigest.com/inside/quality-insider article/problems-skewness- and-kurtosis-part-two.html.

Ying, Y, Albaity, M. & Zainir, F. (2018). Determinants of Capital Structure: A Comparison between Industrial and Consumer Sectors in China. Asian Journal of Business and Accounting, 9(2).

Zabri, S.M., (2013). Financing preferences and capital structure among successful Malaysian SMEs. Doctoral dissertation, University of Plymouth.

Zeitun, R & Tian, G. (2007). Capital structure and corporate performance: evidence from Jordan. Australasian Accounting Business and Finance Journal. 1, 40-53.

DOI: http://dx.doi.org/10.46827/ejmms.v0i0.711


  • There are currently no refbacks.

Copyright (c) 2020 Yao Yuan, S. M. Ferdous Azam, Jacquline Tham

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

The research works published in this journal are free to be accessed. They can be shared (copied and redistributed in any medium or format) and\or adapted (remixed, transformed, and built upon the material for any purpose, commercially and\or not commercially) under the following terms: attribution (appropriate credit must be given indicating original authors, research work name and publication name mentioning if changes were made) and without adding additional restrictions (without restricting others from doing anything the actual license permits). Authors retain the full copyright of their published research works and cannot revoke these freedoms as long as the license terms are followed.

Copyright © 2017-2023. European Journal of Management and Marketing Studies (ISSN 2501 - 9988) is a registered trademark of Open Access Publishing GroupAll rights reserved.

This journal is a serial publication uniquely identified by an International Standard Serial Number (ISSN) serial number certificate issued by Romanian National Library. All the research works are uniquely identified by a CrossRef DOI digital object identifier supplied by indexing and repository platforms. All the research works published on this journal are meeting the Open Access Publishing requirements and standards formulated by Budapest Open Access Initiative (2002), the Bethesda Statement on Open Access Publishing (2003) and  Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities (2003) and can be freely accessed, shared, modified, distributed and used in educational, commercial and non-commercial purposes under a Creative Commons Attribution 4.0 International License. Copyrights of the published research works are retained by authors.