Determinants of the Capital Structure of the Oil and Gas Industry in Malaysia: The Moderating Role of Earnings Volatility

Maran Marimuthu (), Hana Halini Hamzah () and Romana Bangash
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Maran Marimuthu: Department of Management and Humanities, Universiti Teknologi PETRONAS (UTP), Seri Iskandar 32610, Perak Darul Ridzuan, Malaysia
Hana Halini Hamzah: Department of Management and Humanities, Universiti Teknologi PETRONAS (UTP), Seri Iskandar 32610, Perak Darul Ridzuan, Malaysia
Romana Bangash: Institute of Management Sciences (IM|Sciences), Peshawar 25000, Pakistan

Sustainability, 2023, vol. 15, issue 24, 1-13

Abstract: This paper examines the relationship between firm-specific factors and the capital structure of the oil and gas (O&G) industry in Malaysia.. In addition, this paper adds to the literature by investigating the moderating effect of earnings volatility on the relationship between firm-specific factors and capital structure. Random effect models with cluster-robust standard errors were used to analyze this relationship. Using the secondary data from 30 O&G firms listed on the main market of Bursa Malaysia collected between 2010 and 2019 (10 years), the results show that profitability, asset tangibility, liquidity, and firm size significantly impact the capital structure of the O&G industry in Malaysia. However, growth opportunities, non-debt tax shields, and firm age had no significant impact. In addition to this, earnings volatility significantly moderated the relationship between asset tangibility and leverage. In short, when earnings volatility acts as a moderating variable, the relationship between asset tangibility, which is otherwise positive without moderation, turns negative. This study is useful for policymakers in the O&G industry in Malaysia and will help their managers to decide on capital structure for sustainable growth.

Keywords: determinants of capital structure; firm-specific factors; earnings volatility; oil and gas industry; Malaysia (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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