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Effects of Financial development and institutions on firm in Malaysia

This study is motivated to examine if firm growth is dependent on access to external finance but subject to the macroeconomic environment. Using firm-level data from firms listed in Bursa Malaysia for the 2006-2014 period, the study applies dynamic panel system generalized method of moments (GMM) es...

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Main Authors: Lee, Huay Huay, Law, Siong Hook, Lee, Chin, W. Azman-Saini, W. N.
Format: Article
Published: Universiti Malaysia Sarawak 2022
Online Access:http://psasir.upm.edu.my/id/eprint/101174/
https://publisher.unimas.my/ojs/index.php/IJBS/article/view/4597
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spelling my.upm.eprints.1011742024-08-05T07:30:04Z http://psasir.upm.edu.my/id/eprint/101174/ Effects of Financial development and institutions on firm in Malaysia Lee, Huay Huay Law, Siong Hook Lee, Chin W. Azman-Saini, W. N. This study is motivated to examine if firm growth is dependent on access to external finance but subject to the macroeconomic environment. Using firm-level data from firms listed in Bursa Malaysia for the 2006-2014 period, the study applies dynamic panel system generalized method of moments (GMM) estimation (Blundell & Bond, 1998) to estimate how a country’s embedded financial development and institutional quality impacts the linkage of firms’ external financial dependence and growth opportunities to firm growth. A dynamic system GMM approach is employed to address the endogeneity and serial correlation concern. Firms that have greater growth opportunities actually grow faster with better financial development with embedded good institutions in the case of Malaysia. So findings concluded that firms experience higher growth through better allocation of finance since they have good potential to grow. This has shed important light on policymakers in formulating the design of many financial development policies across a wide set of countries aimed at fostering financial markets and the banking services sector to provide the vital sources of external financing needed by corporations in financing their investments. A well-functioning financial system is a necessary condition for promoting firm growth. Universiti Malaysia Sarawak 2022 Article PeerReviewed Lee, Huay Huay and Law, Siong Hook and Lee, Chin and W. Azman-Saini, W. N. (2022) Effects of Financial development and institutions on firm in Malaysia. International Journal of Business and Society, 23. 35 - 53. ISSN 1511-6670 https://publisher.unimas.my/ojs/index.php/IJBS/article/view/4597 10.33736/ijbs.4597.2022
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
description This study is motivated to examine if firm growth is dependent on access to external finance but subject to the macroeconomic environment. Using firm-level data from firms listed in Bursa Malaysia for the 2006-2014 period, the study applies dynamic panel system generalized method of moments (GMM) estimation (Blundell & Bond, 1998) to estimate how a country’s embedded financial development and institutional quality impacts the linkage of firms’ external financial dependence and growth opportunities to firm growth. A dynamic system GMM approach is employed to address the endogeneity and serial correlation concern. Firms that have greater growth opportunities actually grow faster with better financial development with embedded good institutions in the case of Malaysia. So findings concluded that firms experience higher growth through better allocation of finance since they have good potential to grow. This has shed important light on policymakers in formulating the design of many financial development policies across a wide set of countries aimed at fostering financial markets and the banking services sector to provide the vital sources of external financing needed by corporations in financing their investments. A well-functioning financial system is a necessary condition for promoting firm growth.
format Article
author Lee, Huay Huay
Law, Siong Hook
Lee, Chin
W. Azman-Saini, W. N.
spellingShingle Lee, Huay Huay
Law, Siong Hook
Lee, Chin
W. Azman-Saini, W. N.
Effects of Financial development and institutions on firm in Malaysia
author_facet Lee, Huay Huay
Law, Siong Hook
Lee, Chin
W. Azman-Saini, W. N.
author_sort Lee, Huay Huay
title Effects of Financial development and institutions on firm in Malaysia
title_short Effects of Financial development and institutions on firm in Malaysia
title_full Effects of Financial development and institutions on firm in Malaysia
title_fullStr Effects of Financial development and institutions on firm in Malaysia
title_full_unstemmed Effects of Financial development and institutions on firm in Malaysia
title_sort effects of financial development and institutions on firm in malaysia
publisher Universiti Malaysia Sarawak
publishDate 2022
url http://psasir.upm.edu.my/id/eprint/101174/
https://publisher.unimas.my/ojs/index.php/IJBS/article/view/4597
_version_ 1806690477486899200
score 13.211869

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