Financing decisions during different economic periods: evidence from Indonesia and Malaysia

This paper analyses the influence of economic fluctuations on the financing decisions of companies from Indonesia and Malaysia from 1996 to 2005. Our results show that companies with better access to external capital and those that adjust their financial structures faster outperform other companies. In both countries, monetary policy measures appear to be hampered by domestic bank lending practices, capital control measures and the underdevelopment of capital markets. The future development of capital markets and the abolishment of capital control measures, thus, appear to be important issues to increase the efficiency of monetary policy measures in Indonesia and Malaysia.