Quality of Information and the Moderating Effect of Board Size on SME Financial Structure: Malaysian Evidence

Azhar Abdul Rahman
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Azhar Abdul Rahman: Universiti Utara Malaysia

The Journal of Social Sciences Research, 2018, 851-859 Special Issue: 2

Abstract: This study examines whether the quality of financial statement information affects the financial structure of small and medium-sized enterprises (SMEs). Furthermore, it also make the first attempt to test the moderating effect of board size on the relationship between quality of information and leverage decision. Malaysian SMEs are used because there are important differences in the magnitude of disclosure requirements among them. A sample size of 100 SMEs has been considered to do the empirical evaluation. The Ordinary Least Squares (OLS) regression was used to analyze the identified firm-specific variables that affect financial structure. In contrast with the traditional view that asymmetric or incomplete information restricts access to external funds, the results indicate that the quality of financial statement information is not significantly related to SME leverage. Board size does not exert any influence on the relationship between quality of information and leverage decision. However, leverage is negatively related to total assets and profitability.

Keywords: Financial structure; Board size; SME; Information asymmetry; Quality of information (search for similar items in EconPapers)
Date: 2018
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