Towards Share Price Volatility: Does Capital Structure Choices Really Matter?

Abstract

The study was conducted to assess the impact of capital structure on the share price volatility in Tanzania. The study utilized quantitative secondary data spanning a ten (10) year period from 2013 to 2022, sourced from the Dar es Salaam Stock Exchange (DSE) and annual reports of six (6) chosen manufacturing companies. The data was analysed using the random effect panel regression model. Findings revealed that all independent variables (Short term, long term and total debt) have a negative statistically significant effect on share price volatility. On the basis of the study’s findings, the research suggested that, listed companies should adopt effective debt management strategy to mitigate share price volatility. Also, Capital market and security authorities (CMSA) are advised to provide regulatory guidance and enforce transparent reporting requirements for listed companies. Furthermore, Investors are encouraged to adopt a strategic investment approach, considering companies with effective debt management in their decisions. Future researches should use Autoregressive Distributed Lag (ARDL) model to capture both short- and long-term impact of capital structure changes, and include additional debt related metrics and microeconomic factors for a more nuanced understanding of share price volatility.