International Journal of Advanced and Applied Sciences

Int. j. adv. appl. sci.

EISSN: 2313-3724

Print ISSN: 2313-626X

Volume 4, Issue 3  (March 2017), Pages:  87-93

Title: An empirical investigation of picking order theory on hybrid securities: Evidence from Islamic capital market of Malaysia

Author(s):  Mohamad Nizam Jaafar *, Amirul Afif Muhamat, Hairulnizam Hashim, Ismail Ahmad, Sharifah Faigah Syed Alwi


Faculty of Business and Management, Universiti Teknologi MARA, 42300 Bandar Puncak Alam, Selangor, Malaysia

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Capital structure decision is vital in corporate financial management due to its influence on both, return and risk to shareholders. Pecking Order Theory propagates that external capital such as debt or equity is more expensive than internal fund. This is due to the information asymmetric between a firm and investors on the real value of both current operation and future prospect. As such, the objectives of this study are to verify the existence Pecking Order Theory and to examine the determinants of hybrid securities issuance among the Shariah compliant firms in Malaysian Islamic capital market. Notwithstanding Malaysia’s position as one of the major players of Islamic Financial Market sector, there are still lack of studies have been carried out to investigate the impact of capital structure theory specifically on the hybrid securities. Therefore, this study is to enrich literature review of capital structure by providing comprehensive analysis of the determinants of hybrid capital structure on Shariah compliant firms in Malaysia especially based on Pecking Order Theory. We use panel data of 50 companies that have been issued the hybrid securities from the year of 2004- 2012. The model shows a positive correlation between leverage CB and the following variables i.e. age, size, tax shield, profitability, financial risk, growth, tangibility, bond market, and GDP growth. Nevertheless, it has a negative relationship with non-tax shield and stock market. As such, Pecking Order theory is applicable to understand the Malaysian Islamic Capital market. 

© 2017 The Authors. Published by IASE.

This is an open access article under the CC BY-NC-ND license (

Keywords: Capital structure, Pecking order theory, Panel data

Article History: Received 7 November 2016, Received in revised form 12 January 2017, Accepted 14 January 2017

Digital Object Identifier:


Jaafar MN, Muhamat AA, Hashim H, Ahmad I, Alwi SFS (2017). An empirical investigation of picking order theory on hybrid securities: Evidence from Islamic capital market of Malaysia. International Journal of Advanced and Applied Sciences, 4(3): 87-93


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