CAPITAL STRUCTURE DETERMINANTS AND SDG ALIGNMENT: EVIDENCE FROM MALAYSIA’S CONSUMER GOODS SECTOR

Abstract

The Malaysian consumer goods industry is currently facing increasing financial pressure due to rising interest rates, inflationary pressures, and economic uncertainty. These challenges have significantly influenced firms' financing decisions and their ability to maintain sustainable capital structures. Capital structure remains an important component for corporate financial management because it determines how a firm balances its debt and equity financing while influencing financial risk and firm value. Therefore, analyzing the determinants of capital structure choices is important to maintain a firm's long-term financial stability and strengthening its ability to adapt to changing business conditions. Despite the importance of capital structure in ensuring long-term financial stability as SDG 8, limited studies have examined impact of firm-specific determinants on capital structure decisions among Malaysian consumer goods companies. Existing Malaysian studies tend to examine broader industrial sectors or focus on corporate governance and firm performance rather than analysing the combined effects of asset structure, earnings volatility, financial flexibility, and growth opportunities on firms’ financing decisions. Furthermore, recent economic challenges, including rising interest rates and inflationary pressures, have altered corporate financing behaviour, creating a need for updated evidence within the Malaysian consumer goods industry. Therefore, this research observes the relationship between asset structure, earnings volatility, financial flexibility, and growth opportunities on the capital structure of consumer goods companies listed on Bursa Malaysia from 2015 to 2024. To determine the most appropriate model requirement, both the Fixed Effects Model (FEM) and Random Effects Model (REM) were estimated and evaluated using Hausman test. The findings provide empirical support for the Pecking Order Theory within the Malaysian consumer goods sector. The results reveal that asset structure and financial flexibility is associated with firm leverage, whereas earnings volatility exerts a significant negative effect.