Determinants of Long-Term Financing Decisions: An Empirical Investigation on the Oil and Gas Firms in Malaysia

Abstract

The financing decision is the most vital decision that a firm takes as it affects the firm value and shareholders’ wealth. While the main contributions of past studies on financing decision come from developed countries, the same issues are of equal concern for developing countries, and no exemption to Malaysia. Therefore, the main purpose of this study is to investigate the influence of determinants of long-term financing among the oil and gas firms in Malaysia. The study adopts the pooled OLS, fixed effect, and random effect regression analysis and employs 28 oil and gas firms listed on Bursa Malaysia over the period of 2008 – 2017. The findings reveal that asset tangibility is the only determinant that consistently shows a significant impact on the significant effect on the long-term borrowing decision while other determinants remain insignificant across the three models. This reiterates the fact that fixed asset requirement remains as the fundamental requirement for the oil and gas firms, especially when raising their financial leverage. This offers a new lens of understanding in the literature of financing decisions from the perspective of the energy sector.