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Jurnal Ekonomi Malaysia

53 (2) 2019 99 – 122

Macroeconomic Uncertainty and Corporate Capital Structure: Evidence from the Asia Pacific Region
Ketidaktentuan Makroekonomi dan Struktur Modal Korporat: Bukti dari Rantau Asia Pasifik

Faculty of Accountancy, Finance and Business
Tunku Abdul Rahman University College
Jalan Genting Kelang, Setapak,
53300 Kuala Lumpur,
MALAYSIA

chowyeepeng@gmail.com

Faculty of Economics and Management
Universiti Putra Malaysia
43400 Serdang, Selangor,
MALAYSIA

junaina@upm.edu.my

Faculty of Economics and Management
Universiti Putra Malaysia
43400 Serdang, Selangor,
MALAYSIA

bany@upm.edu.my

Faculty of Economics and Management
Universiti Putra Malaysia
43400 Serdang, Selangor,
MALAYSIA

chengfanfah@upm.edu.my

Abstract

The purpose of this paper is to examine the impact of macroeconomic uncertainty on corporate capital structure. This paper considers a wide spectrum of proxies for macroeconomic uncertainty to identify which types of macroeconomic uncertainty are important to the capital structure decisions of a sample of listed firms from seven Asia Pacific countries for the period 2004-2014. The regression models are estimated using the robust two-step system generalised method of moments (GMM) estimator. The results generally provide robust evidence of the negative effect of macroeconomic uncertainty on Asia Pacific firms’ capital structure using different proxies for macroeconomic uncertainty. When the aggregate data are split into developing and developed countries, this paper continues to find some evidence supporting the negative association between macroeconomic uncertainty and capital structure. The results also indicate that the three broad classifications of macroeconomic uncertainty, i.e., external sources of macroeconomic uncertainty, domestic sources of macroeconomic uncertainty, and volatility as a macroeconomic outcome, significantly affect corporate capital structure. Further analyses reveal that the capital structures of firms in the developing and developed countries are affected by different types of macroeconomic uncertainty. Hence, policy makers should strive to devise suitable course of actions to overcome the unfavourable outcomes stemming from the volatility in the macroeconomic environment, bearing in mind of the multidimensional aspects of macroeconomic uncertainty

Keywords

Asia Pacific; capital structure; leverage; macroeconomic uncertainty; risks
http://dx.doi.org/10.17576/JEM-2019-5302-8
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Chow, , Muhammad, , Bany-Ariffin, , & Cheng, (2019). Macroeconomic Uncertainty and Corporate Capital Structure: Evidence from the Asia Pacific Region. Jurnal Ekonomi Malaysia, 53(2), 99–122. http://dx.doi.org/10.17576/JEM-2019-5302-8

@article{chow2019macroeconomic,
  title={Macroeconomic Uncertainty and Corporate Capital Structure: Evidence from the Asia Pacific Region},
  author={Chow, Yee Peng and Muhammad, Junaina and Bany-Ariffin, A.N. and Cheng, Fan Fah},
  journal={Jurnal Ekonomi Malaysia},
  volume={53},
  number={2},
  pages={99—122},
 

year={2019},
}

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