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Impact of Firm Specific Factors on Capital Structure Decision: An Empirical Study of Bangladeshi Companies

Author

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  • Md. Faruk Hossain

    (Northern University Bangladesh, Bangladesh)

  • Md. Ayub Ali

    (University of Rajshahi, Bangladesh)

Abstract

This study attempts to explore the impact of firm specific factors on capital structure decision for a sample of 39-firm listed on Dhaka Stock Exchange (DSE) during 2003-2007. To achieve the objectives, this study tests a null hypothesis that none of the firm’s specific factors namely profitability, tangibility, non-debt tax shield, growth opportunities, liquidity, earnings volatility, size, dividend payment, managerial ownership, and industry classification has significant impact on leverage using estimate of fixed effect model under Ordinary Least Square (OLS) regression. Checking multicollinearity and estimating regression analysis through Pearson correlation and autoregressive mode respectively this study found that profitability, tangibility, liquidity, and managerial ownership have significant and negative impact on leverage. Positive and significant impact of growth opportunity and non-debt tax shield on leverage has been found in this study. On the other hand size, earnings volatility, and dividend payment were not found to be significant explanatory variables of leverage. Results also reveal that total debt to total assets ratios are significantly different across Bangladeshi industries.

Suggested Citation

  • Md. Faruk Hossain & Md. Ayub Ali, 2012. "Impact of Firm Specific Factors on Capital Structure Decision: An Empirical Study of Bangladeshi Companies," International Journal of Business Research and Management (IJBRM), Computer Science Journals (CSC Journals), vol. 3(4), pages 163-182, August.
    • Handle: RePEc:aml:intbrm:v:3:y:2012:i:4:p:163-182
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    2. Oscar Briones & Melisa Chang, 2017. "Capital Structure Determinants Influence: A Comparative Study," Proceedings of International Academic Conferences 5007097, International Institute of Social and Economic Sciences.
    3. Aamer Shahzad & Muhammad Azeem & Mian Sajid Nazir & Xuan Vinh Vo & Nguyen T. M. Linh, 2021. "The determinants of capital structure: Evidence from SAARC countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6471-6487, October.
    4. Sohail Younus & Khurram Ishfaq & Muhammad Usman & Muhammad Azeem, 2014. "Capital Structure and Financial Performance: Evidence from Sugar Industry in Karachi Stock Exchange Pakistan," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(4), pages 272-279, October.
    5. Manar Al-Mohareb & Mahmoud Alkhalaileh, 2019. "The Association between Earnings Management and Capital Structure: An Empirical Study on Jordanian Firms Listed in Amman Stock Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 106-112.
    6. Jahirul HOQUE & Ashraf HOSSAIN & Kabir HOSSAIN, 2014. "Impact Of Capital Structure Policy On Value Of The Firm – A Study On Some Selected Corporate Manufacturing Firms Under Dhaka Stock Exchange," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 3(2), pages 1-9, July.

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    More about this item

    Keywords

    Capital structure; Leverage; Firm’s specific factors; Dhaka Stock Exchange Bangladesh.;
    All these keywords.

    JEL classification:

    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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