Measuring Capital Structure Determinants of Small and Medium Enterprises (SMEs): An Assessment of Construct Reliability and Validity of a Proposed Questionnaire

Hafizah Mat Nawi


This paper presents the assessment of reliability and validity of a proposed questionnaire of the capital structure determinants. The questionnaire is developed based on the existing measurement scales from the literature, interviews and focus groups discussions with the SMEs’ owners from the East-Coast region of Malaysia. The study analysed a total of 384 questionnaires. This study analyses data using SPSS 24.0. A purification process involves scale reliability and Exploratory Factor Analysis. A total of 11 constructs and 40 out of the initial 52 items represent the theoretical model. Items assigned to each dimension consistently exhibited high loadings on their constructs. In addition, results showed a relatively high internal consistency, with a Cronbach alpha greater than 0.7 for all constructs, except for three of the constructs (i.e. commercial goals, social welfare goals, and external environment). This study contributes to theory extension and testing, verification of the conceptualisation and operationalisation of constructs, and replication of the previous studies. The findings help in introducing a research framework to be as a standard measurement for SMEs’ capital structure determinants.


Capital structure; Small and Medium Enterprises (SMEs); Reliability; Exploratory Factor Analysis (EFA); Questionnaire; Malaysia; East-coast region; Cronbach alpha; SPSS 24.0

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