The Nexus Between Debt Structure and Firm Financial Sustainability in Malaysia: A Pandemic Perspective

Abstract

This paper the presents an evaluation of capital structure against the backdrop of Malaysian corporate sustainability by examining the link between capital structure and firm financial sustainability. The study employed 500 firm-years data in the main market of Bursa Malaysia from 2018 to 2022 and analyzed the results using multivariate regression analyses. The debt ratio does not support firms’ financial sustainability could be due to the companies’ borrowings do not generating sufficient profit to cover its costs for pre- and during Covid-19 periods. During Covid-19 period shows that the debt ratio is negatively correlated with higher magnitude to the firms’ financial sustainability, mainly due to higher companies’ debts distress during the pandemic period. Similarly, both short-term and long-term debts do not bring firms’ financial sustainability. On the other hand, this study found that a bigger firm size improved the firm’s financial sustainability. These findings help the corporate managers to do capital structure decision and policymakers to formulate incentives to promote sustainable capital structure among Malaysian corporations.