Corporate financing decisions: Evidence from the Asia Pacific region

Abstract

This thesis analyses the corporate financing decisions of listed non-financial firms operating in the Asia Pacific countries, namely Thailand, Malaysia, Singapore and Australia, for the period from 1993 to 2001. These four countries have different legal, corporate governance, financial and institutional environments and were affected by the 1997 Asian financial crisis in different ways and to different degrees. Therefore, this thesis aims to shed light on the impact of these differences and the financial crisis on financing policies and practices of firms in this region. The empirical analysis consists of three main parts: (i) the determinants of capital structure (the use of debt versus equity); (іі) the determinants of debt maturity structure (the use of long-term debt versus short-term debt); and (ііі) the tests of the extent to which the main capital structure theory (the pecking order theory) accounts for the financing behaviour of firms in this region. The results suggest that capital structure and debt maturity structure decisions of a firm are not only the product of its own characteristics as identified by the extant literature but also the function of the financial and legal environment in which it operates. The results also show that firms in this region do not behave as strictly as predicted by the pecking order theory. However, they reveal that financial deficit (the key factor in the pecking order theory) challenges the exclusive role of the conventional factors. The financial crisis of 1997 is also found to have had significant but diverse impacts on the firms' financing decisions across the region, especially in Thailand where the crisis originated. In addition, the pecking order behaviour tends to be more pronounced for the post-crisis period.