One of the most common problems of corporate finance is the issue of financing
decision among financial managers. A mistaken funding decision may impact the
company’s efficiency and result in a lower return to the owner and even expose the
company to financial distress. The presence of corporate governance is critical to direct
a firm towards better governance and making a sound financing decision to ensure
company survival. Prior studies provide the mixed result on the relationship between
corporate governance mechanism and financing decision. Therefore, this study aims to
examine the relationship between corporate governance mechanisms and financing
decision of Top 100 Malaysian PLCs. Five of the corporate governance mechanisms
used in this study are the board size, board independence, CEO duality, managerial
ownership and institutional investors. Also, there are four control variables included in
this study, namely firm size, firm age, profitability and liquidity. The final sample of
77 companies has been included with observation over three years from 2016 to 2018.
The data are collected from the company’s annual report, which is available on the
company and Bursa Malaysia websites. The financing decision was measured using the
debt ratio, and the result revealed that the level of debt ratio among Top 100 PLCs is
moderate. The correlation and regression analysis are used to test the relationship
between both variables. However, the result showed that none of the corporate
governance mechanism has a significant relationship with the financing decision.
Additionally, the results show that liquidity and size of a company have a significant
impact on the company's financing decision. To sum up, this study suggests that the
corporate governance mechanism has no significant impact on financing decision as
other relevant factors may play roles in determining the company’s financing decision.
