CAPITAL STRUCTURE AND THE DETERMINANTS OF THE BANKING SECTOR: THE CASE OF MALAYSIA

his paper examines the determinants of capital structure of commercial banks in Malaysia. The determinants include asset structure, growth, size, risk, proitability and tax shield, liquidity and eiciency. All the nine local commercial banks are considered in this study over the period 1998 to 2007. Econometrics methodology incorporates both time series and cross-sectional data to perform regression analyses that include the pooled efect, ixed efect and random efect methods. The indings indicate that the explanatory power of the determinants tends to difer on total leverage, long term leverage and short term leverage. Almost all the determinants are correlated with the banks’ long-term leverage. It is evident that pecking order theory seems to be more applicable for the banking institutions.