1. UKM Learning and Research Repository
2. PHD Thesis / Tesis PHD
3. Graduate School of Business / Pusat Pengajian Siswazah Perniagaan

Title:	Driving factors of debt, debt-financial performance, moderating effect of financial flexibility and optimal debt threshold of REITs in Malaysia: an integrated perspectives
Authors:	Zalina Zainudin (ZP01213)
Supervisor:	Izani Ibrahim, Prof. Dr.
Keywords:	Debt Financial performance REITs entity Trade-off theory Universiti Kebangsaan Malaysia -- Dissertations
Issue Date:	18-Jan-2017
Description:	This study has been structured into four central-related aims. The first aim is to investigate the great curiosity around REITs entity in Malaysia (M-REITs), particularly about the reason why they use debt although they do not receive any tax shield benefits. The trade-off theory implies that the financing strategy of using debt provides no value in REITs entity with a marginal tax rate of zero. Thus, the use of debt by REITs entity is seen to be puzzling. Next, the second related aim is to examine the relationship between debt and financial performance. This study extends the debt overhang theory (Myers 1977) by examining the moderating effect of financial flexibility on debt-financial performance relationship, that leads to the third aim of the study. Lastly, the study aims to identify the thresholds of optimal debt at the point where financial performance of M-REITs has reached the optimum level. Empirically, this study covers financial data of all M-REITs for the period between 2005 and 2014. A pooled estimated generalized least squares (EGLS) method for cross-section heterogeneity is used to estimate the determinant factors of using debt and to determine debt-performance relationship. The moderating model is analysed using Warp Partial Least Squares (WarpPLS 5.0) by Kock, 2015. While the estimation of optimal debt threshold is estimated using the advanced panel threshold regression model by adapting the Bai and Perron (1998, 2003), Perron (2006) methodologies and the latest development of the threshold regression model of Hansen (2015). The results of this study indicate that both pecking order theory and trade off theory are complementary to each other in explaining the M-REITs debt financing decision, but less supportive for agency theory on disciplinary tools. This suggests that the use of debt as a disciplinary tool seems to be less crucial for M-REITs entity with high mandated dividend payout requirement. Indeed, this high payout requirement behaves as a “disciplinary tool” in M-REITs. On the relationship between debt and financial performance, the results reveal that both short term and long term debts have been negatively related to financial performance, whereas liquidity is found to be an important factor on M-REITs’ financial performance. However, the size of M-REITs is found to have no relationship with financial performance. One unanticipated and interesting findings of this data is that, financial flexibility positively moderates the relationship between debt and financial performance. The most striking result that emerged from this study is that the optimal debt for M-REITs is between 16.30% and 32.76%. It was found that further increase in debt level beyond the identified optimal debt threshold impaired the financial performance of M-REITs. The results also reveal an important insight that the optimal debt level identified in this study is lower than the permitted gearing limit imposed by Malaysian regulatory on M-REITs that is 50% of total asset value. This finding supports the trade-off theory which holds that there is an optimal debt level and debt overhang theory which assets financed with too much debt will destroys firm’s financial performance. The findings retrieved from this study serve as a useful guide to M-REITs’ managers in strategizing their debt financing decision to support their operational and investment growth needs. Overall, M-REITs managers should maintain the optimal debt level, as well as execute the investment growth when the yields of new investment are greater than the cost of debt in order to enhance the value of shareholders.,Certification of Master's/Doctoral Thesis" is not available
Pages:	204
Publisher:	UKM, Bangi
Appears in Collections:	Graduate School of Business / Pusat Pengajian Siswazah Perniagaan

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.