capital structure

Topics: Finance, Palm oil, Oil palm Pages: 2 (551 words) Published: April 27, 2014
The context of this paper is to investigate the relationship between capital structure and firm performance on Malaysia plantations industries. According to Brealey and Myers (1988), the capital structure will determine the survival of a business. Damodaran (2001) defined capital structure as the mix of debt and equity used to finance the operation of firms. Capital structure is closed link with corporate performance (Tian and Zeitun, 2007). Corporate performance can be measured by variables which involve productivity, profitability, growth or, customers satisfaction. Companies often use debt when constructing their capital structure, which helps lower total financing cost and lower cost of debt financing. In general, using debt helps keep profits within a company and increases returns on equity for current company owners and helps secure tax savings. Malaysia plantation industry is an integral part of the agricultural sector. The major crops produces are palm oil, rubber and cocoa. For example, oil palm plantation sector is currently the second largest export revenue earner for Malaysia. Malaysia remains the world top exporter of palm oil, which is 47% of global exports, and seconds after Indonesia in palm oil production, accounting for 41% of global production. In year 2008, palm oil contributed around 3.2% of the country real gross domestic product (GDP), with more than 90% of the country total production exporter to countries such as Chiba, India, the European Union and Pakistan. According to Y.B Tan Sri Bernard Dompok Minister of Plantation Industries and Commodities, Malaysia said on 28 May 2012. The plantation industry is very important industry in Malaysia Economies Transformation Programme. In Fact, rubber and oil palm are the two crops that have been added to the twelve key economic areas that the government is promoting. For examples, the palm oils industries contributed about 20% of Malaysia export earning, an increases of more than...
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