The Effects of Liquidity, Profitability and Board Characteristics on Debt Restructuring Likelihood Among Malaysian GLCs

Adilah Azhari* and Hanita Kadir
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Adilah Azhari*: School of Economics, Finance and Banking, College of Business, Universiti Utara Malaysia
Hanita Kadir: School of Economics, Finance and Banking, College of Business, Universiti Utara Malaysia

The Journal of Social Sciences Research, 2018, 942-950 Special Issue: 6

Abstract: This study investigates the cross-sectional variation in debt restructuring among Malaysian publicly listed Government Linked companies (GLCs) and non-GLCs (NGLCs) for the period of from 2005 to 2015. It attempts to test several firm determinants that can influence the likelihood of Malaysian GLCs to exercise debt restructuring. Past studies argue that liquidity and profitability influences firm’s choice to exercise debt restructuring. This study proposes variants of board of characteristics as one of the influential factors in GLCs debt restructuring since board of directors for this type of organization are usually controlled or owned by government. We employ imbalanced panel data with logistic regression as the method of analysis. The findings show that liquidity, profitability and board characteristics have significant relationship with debt restructuring. The results for profitability indicates that firm with low profitability has higher chance for debt restructuring exercise. However, liquidity has recorded an opposite relationship in our sample. This may be due to our liquidity measures the focuses on short term assets which is less appropriate in debt restructuring context. With regards to board characteristics, three variables such as board size, fraction of Malay directors and fraction of directors with Master degrees show negative and significant relationship influence on the debt restructuring.

Keywords: Debt restructuring; GLCs; Non-GLCs; Board characteristics; Logistic regressions. (search for similar items in EconPapers)
Date: 2018
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