Abstract
It is mostly due to the factors that decide the overall capital structure of the company. A greater capital structure helps the company realize both sustainable long-term Growth and long-above average results. The objective of this study is to find out the relation between capital structure and debt ratio of manufacturing companies listed in the Colombo Stock Exchange. Thus, the study was considered with panel data for the period of 2011– 2015 of the twenty six companies. Correlation, and multiple regression analysis of statistical tools were used to analyze and to test the hypothesis of the study. In this analysis, the dependent variable is the debt ratio of the firms and the Capital structure determinants, which are measured by Profitability, Tangibility, firm size, Growth, and non-debt tax shield. The results showed that Profitability, Growth, Firm Size, and Non-Debt Tax shield have significant impact on debt ratio except Tangibility. Further, it finding showed that the firm size mostly consistent with trade-off theory and profitability and growth consistent with packing order theory and prove past empirical findings also.
Highlights
Capital is a requirement for developing companies
This current study evaluated the association between capital structure determinants and leverage level of manufacturing entities on the Colombo Stock Exchange during a fiveyear period (2010/11-2014/15)
This study employed with debt ratios of debt ratios as the dependent variable
Summary
Capital is a requirement for developing companies. The capital may be collected by either borrowing money or raising money from bonds. Selecting Debt and equity instruments in a fair manner is complicated because there are varying risks and benefits to the securities When it comes to selecting a method of security, the wrong decisions will result in financial difficulty and bankruptcy. These influences, which impact capital structure, have been studied extensively, and their findings are seen in many countries, including the UK, Greece, Qatar, the Arabian Peninsula, Ghana, Australia, Pakistan, Indonesia, Brazil, India, and more. The research void on this topic can be filled For this cause, there are almost no studies linked to capital structure determinants in listed Sri Lankan manufacturing firms. The research’s key objective is to find out which factors decide the debt ratios of listed manufacturing companies
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