Determinants of Capital Structure: A Study on Some DSE Listed Corporate Firms in Bangladesh

Abstract

<p><em>Capital structure is the mix of debt and equity that the company uses in its operation (Modigliani and Miller, 1958). Debt comes in the form of bond issues or long-term notes payable, while </em><em>equity</em><em> is classified as common stock, preferred stock or retained earnings. </em><em>Factors </em><em>such as like tangibility of Assets, non-debt tax shield, profitability, size, and growth opportunity of the firm are the major determinants of capital structure (Sasho and Akelsander, 2016). The purpose of this paper is to study the relationship between the independent variables (tangibility of Assets, non-debt tax shield, profitability, size, and growth opportunity) and dependent variable (leverage). In the present study,</em><em> different multiple variables are used to take convenient capital structure decision of 17 DSE listed corporate firms operating in Bangladesh, dividing into four sectors i.e. Pharmaceuticals and chemicals, Tannery, Cement </em>and Ceramic<em> sectors. </em><em>This Study follows quantitative research method. This research was conducted during the period of 2010-2016. It has been found tangibility of assets, non-debt tax shield and growth opportunities have positive relation with leverage. In contrast, size shares significant negative relation with leverage. Profitability has negative relation with leverage but the result is not statistically significant. Thus, it can be said that tangibility of assets, non-debt tax shield, growth opportunity and size of the firm are the major determinants of the capital structure of the DSE listed corporate firms.</em></p>

Full Text: PDF