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An Empirical Analysis of Corporate Debt Maturity Structure : Evidence from Malaysia Sukuk Issues

Mohammad Badri Rozali (Universiti Utara Malaysia)

Mohd Azmi Omar (International Islamic University Malaysia)

Abstract:

Amidst vast literatures on the theoretical and empirical aspects of corporate capital structure studies in debt maturity structure vis-a-vis debt-equity choice are scant and relatively new. This paper attempts to investigate the empirical determinants of the maturity of Malaysia corporate debt issues based on the incremental approach. This is done by testing several underpinning theoretical models of debt maturity structure using cross- sectional data set of conventional band and sukuk issues over the 1999-2007 period. The findings on conventional bonds lend considerable support to the agency cost hypotheses and signalling and asymmetric information hypotheses but provide no support for tax hypotheses. In the case of sukuk issues, the evidences in general offer limited support to all testable hypotheses. Only leverage ratio under the signalling and asymmetric information hypotheses and effective tax rate under the tax hypotheses are found to have significant effects on the maturity structure of sukuk.

Keywords: Debt maturity, incremental approach, sukuk

 

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JMIFR - Vol 8, No.1 2011 - Part 8.pdf

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