Capital Structure Choice of Bangladeshi Firms: An Empirical Investigation
Abstract
This study endeavors to investigate the impact of firm specific factors on capital structure decision for a sample of 44-firm listed on Dhaka Stock Exchange (DSE) during the period of 2004-2011. To achieve the objectives, this study tests a null hypothesis that none of the firm’s specific factors such as, liquidity, market to book, collateral, dividend payment, profitability, size 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 model respectively this study found that profitability, collateral and liquidity have significant and negative impact on leverage. Positive and significant impact of market to book value ratio on leverage has been found in this study. On the other hand, dividend payment and size were not found as significant explanatory variables of leverage. Results also expose that total debts to total assets ratios are significantly different across Bangladeshi industries.
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