Determinants of Capital Structure Decisions Among International Takaful Operators In Malaysia: Evidence From Panel Data Analysis

The capital structure decision remains an important issue in Shariah-compliant corporate finance, particularly for financial institutions whose regulatory requirements and risk-sharing structures differ from those of conventional corporations. Despite the development of Islamic finance, empirical evidence on the firm-specific determinants of leverage among foreign-owned international Takaful operators in Malaysia remains limited. This study examines the effects of firm age, firm size, liquidity, profitability, and company growth on capital structure using panel data from four foreign-owned international Takaful operators in Malaysia. Capital structure is proxied by the total-liabilities-to-total-assets ratio, which represents overall balance-sheet leverage rather than conventional interest-bearing debt alone. Audited annual financial statements were analysed using panel data regression with cluster-robust standard errors. The findings indicate that firm age, firm size, and liquidity are positively and statistically associated with leverage, whereas profitability and company growth show negative but statistically insignificant relationships. The results suggest that organizational maturity, scale, and liquidity are relevant to the liability structure of international Takaful operators, although the findings should be interpreted within the distinctive regulatory and Shariah-compliant characteristics of the industry. Overall, the evidence provides partial support for the Trade-off Theory and limited support for the Pecking Order Theory when these frameworks are adapted to the Takaful setting. The study contributes to the limited literature on capital structure in Islamic insurance and offers implications for the management of leverage, liquidity, and solvency within international Takaful operators.