Debt discipline after privatization: lifecycle and market-structure evidence from Malaysia

This study examines whether the marginal effects of leverage on firm performance vary across post-reform lifecycle stages and market structures. Using 794 firm-year observations from 40 Malaysian firms with documented privatization and state-linked corporate reform histories over 2000–2024, the study applies firm and year fixed-effects models. The findings show that the leverage-performance relationship is heterogeneous rather than uniform. However, there is no general evidence of the nonlinear balancing relationship predicted by trade-off theory, while evidence of lifecycle heterogeneity is limited. The strongest heterogeneity emerges across market structures, with competitive firms experiencing greater leverage-related profitability pressure than regulated firms. Results from a range of sensitivity and robustness checks largely preserve the main findings. From a policy perspective, the findings support a risk-based and lifecycle-sensitive approach to capital structure that accounts for firms’ competitive exposure, financial resilience and debt servicing capacity, particularly in regulated firms in which government retains an ownership stake or remains financially exposed.