Abstract
This article assesses how financing scale and financing cost relate to the performance of small and medium-sized firms (SMEs) listed on Malaysia’s ACE and LEAP markets from 2020 to 2024. Based on information asymmetry and pecking order theory, it analyses the realised scale of financing (the natural logarithm of total debt) and realised cost of financing (the ratio of interest expense to total debt) as equilibrium outcomes reflecting financing constraints. It also examines their independent, interactive and nonlinear effects on performance. A two-way fixed-effects panel was estimated using 181 SMEs and 905 firm-year observations from LSEG Workspace and Bursa Malaysia. The main finding is that within-firm performance depends on debt composition rather than aggregate scale or contemporaneous cost. Short-term debt is significantly and negatively associated with return on assets, whereas aggregate financing scale and contemporaneous financing cost are not statistically significant. Asset tangibility is consistently negatively associated with performance, potentially reflecting operating rigidity, sectoral capital intensity or inefficient asset use. Financing cost has a marginally negative effect on larger SMEs, while robustness tests indicate a delayed financing-cost effect. The findings offer cautious implications for Bank Negara Malaysia, SME Corporation Malaysia and the Securities Commission.