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Impact of Firm Specific Factors on Capital Structure Decision: An Empirical Study of Bangladeshi Companies
Md. Faruk Hossain , Md. Ayub Ali
Pages - 163 - 182     |    Revised - 15-07-2012     |    Published - 10-08-2012
Volume - 3   Issue - 4    |    Publication Date - July / August 2012  Table of Contents
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KEYWORDS
Capital Structure, Leverage, Firm’s Specific Factors, Dhaka Stock Exchange, Bangladesh
ABSTRACT
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. Keywords: Capital structure, Leverage, Firm’s specific factors, Dhaka Stock Exchange Bangladesh.
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Mr. Md. Faruk Hossain
Northern University Bangladesh - Bangladesh
faruk_par_fin@yahoo.com
Dr. Md. Ayub Ali
University of Rajshahi - Bangladesh