Joint Determinants Of Capital Structure And Dividend Policy: Evidence From Emerging Market Of Bangladesh

A plethora of articles have been written on the determinants of capital structure and dividend policy. However, most of these studies focused on only one puzzle at a time while joint determinants of capital structure and dividend policy are still under-researched. The purpose of the study is to mainly investigate whether or not there are factors that can jointly explain capital structure and dividend policy decisions in the emerging market of Bangladesh. For analyses purposes, data was gathered for 40 Bangladeshi firms listed on the Dhaka Stock Exchange during the period 2009-2013. Results were obtained by conducting Ordinary Least Squares regression analyses in which the debt and dividend payout ratios (as the dependent variables) were regressed on the five explanatory variables: closely held shares, liquidity, profitability, growth, and size. Findings from the regression analyses indicate that capital structure and dividend policy jointly depend on the profitability and size of Bangladeshi firms. This result gives credit to the pecking order theory, signaling theory, trade-off theory, and agency theory. It appears to be the first study that investigates the joint determinants of capital structure and dividend policy within the emerging market of Bangladesh, hence contributing to literature.