The determinants of capital structure for thai listed companies in mal capital market

Abstract

This research studies the relationship between the determinants of capital structure with a leverage ratio of the Thai listed companies in the MAI stock market. The research data was gathered from 2015 to 2019, using the panel data on a quarterly interval, to assess the performance of listed firms in MAI following the financial crisis (hamburger crisis) and prior to the COVID-19 pandemic. The leverage ratio is measured through two dependent variables which are the total short-term debt over the total book value of an asset and the total long-term debt over the total book value of the asset. The financial explanatory determinants at the firm level include profitability, intangible assets, growth opportunities, and liquidity. Moreover, there are two control variables which are GDP growth and inflation rate. This research investigates the relationship between the determinants of capital structure and leverage ratio. The data is analyzed through a random fixed effect regression model (RFM) with a multiple regression model. The research findings suggest that a substantial role in the effect of MAI-listed firms’ leverage is the unobserved time-invariant firms’ randomly fixed effect. More importantly, profitability, intangible assets, and liquidity have a significant influence on the short-term leverage. Only growth opportunities do not have a significant effect on the short-term leverage. In terms of the long-term leverage, only intangible assets have a significant influence on the long-term debt, while profitability, liquidity, and growth opportunities do not have a significant influence on long-term debt. Most of the research findings are consistent with the Pecking order theory. IMPLICATION OF THESIS: The knowledge of capital structure management is essential for both managers and investors of the MAI market. For managers, the knowledge gained from this study can be used as a guideline for optimal financing of corporations. For investors, this finding allows a better understanding of the financial management of companies so that investors and managers can be more aligned on the rationale behind each financial decision / symmetric information and achieve further success together.