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Factors Influencing Capital Structure on Firm’s Value: A Study on DSE Listed Companies

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  • Md. Edrich Molla

Abstract

Using a panel of listed companies on the DSE, researcher investigates the association of capital structure on firm value and investigates the capital structure of firms in Bangladesh. This current study focuses that the results of the analysis on the relevance of capital structure on firm value indicated, there is no statistically significant relationship between firm value and the capital structure of firms. This analysis was conducted for the general sample of firms in the study, within industries and by firm size; however, the results were consistent throughout all the analysis. The analysis of the Bangladeshi firms’ capital structure indicated that firms in Bangladesh tend to use more long-term debt than short-term debt. The leverage ratios also differed among industries with the Pharmaceuticals & Chemicals having the highest levels of leverage and the Textile industry having the lowest levels of leverage. The results of the capital structure and its determinants analysis indicated that Bangladeshi firms followed a pecking order theory. The results also indicated that profitability, size, asset tangibility and tax shield has a statistically significant relationship to gearing or the firm’s capital structure.

Suggested Citation

  • Md. Edrich Molla, 2019. "Factors Influencing Capital Structure on Firm’s Value: A Study on DSE Listed Companies," International Journal of Science and Business, IJSAB International, vol. 3(1), pages 37-51.
    • Handle: RePEc:aif:journl:v:3:y:2019:i:1:p:37-51
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