The Effect of Capital Structure on Firm Performance During COVID-19 Pandemic: Evidence from Technology Listed Companies in Malaysia
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UNIVERSITI MALAYSIA SARAWAK
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This study examines the relationship between capital structure and firm performance of technology companies listed in Malaysia, incorporating the impact of the COVID-19 pandemic. The specific objectives are to assess the effect of capital structure on firm performance before and during the pandemic, as well as the moderating role of COVID-19. The analysis is based on a sample of 117 technology firms listed on Bursa Malaysia across the Leap, Main, and ACE markets. Using unbalanced panel data spanning from 1992 to 2022, this study employs return on assets (ROA) as the dependent variable. The independent variables include the total debt to total assets ratio (DTA) and long-term debt to total assets ratio (LTDA), while tangibility (TANG), firm size (SIZE), and firm growth (GROWTH) serve as control variables. The COVID-19 pandemic is incorporated as a moderating variable. Findings from the fixed effects panel regression analysis indicate that both DTA and LTDA have a significant negative impact on ROA, both before and during the pandemic. However, firms adjusted their capital structures throughout the crisis to mitigate financial distress, as evidenced by the moderating interaction terms. Additionally, firm size and growth are identified as key drivers of ROA, as they enable firms to scale operations and generate higher revenues. Ultimately, the study suggests that firms should adopt effective debt management strategies to optimize their capital structure and enhance financial resilience. Financial institutions, in turn, should develop adaptive financing solutions that support businesses in navigating economic disruptions.