Abstract
Capital structure decision is about mixing debt and equity financing of a firm. This decision is vital to the firms’ overall operations and growth due to the need to maximize return that ultimately affect firm’s value. In the mean time, other factors and risks must also be considered when deciding a debt or equity financing. The main objective of this study is to investigate the relationship of liquidity, profitability, size of firm, interest coverage ratio and growth towards capital structure in communication and technology industry which focuses on the period of 2010–2015 on a quarterly basis. Ten companies are selected as a sample that contributes to the total samples of 240 observations. The dependent variable is capital structure (debt to equity ratio) while the independent variables are liquidity (current ratio), profitability (net profit margin), size of firm (total asset), interest coverage ratio and growth (sales). The multiple regression is applied towards the data in order to determine the relationship of capital structure in the industry. Thus, the findings stated that liquidity, interest coverage ratio and growth were found to have statistically significant negative relationships on debt to equity ratio, while size of firm and profitability were statistically significant and positive relationships.
Published Version
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