This study focused on the context of government borrowing and the firm’s financial decisions to provide insights to external investors and explore the effects of government leverage on the corporate choice of financing and capital structure. The sample used includes nonfinancial Public Listed Corporations (PLCs) that are listed on Bursa Malaysia exchange firm-level datasets with the period from 2010 to 2020. This research employed the panel regression which includes fixed effect model or random effect model using the data obtained from S&P Global Database and Bank Negara Malaysia. The study found that there is a significant positive relationship between corporate leverage and government leverage in Malaysia. The findings obtained is aligned with the corporate debt and government debt condition in Malaysia and found that there is a violation of crowding-out effect theory in Malaysia capital market. These findings provide insights into the firm’s capital structure choices and the impact of government debt on the financial leverage of PLCs. External investors can understand the financial performances of the company before making decisions on their investment. These findings provide insights into the Malaysian government where the corporate choice of financing and capital structure is not affected by the government borrowing.