Conscientia Beam || conscientiabeam.com

Export to

Citations

Contact Us

For Marketing, Sales and Subscriptions Inquiries

2637 E Atlantic Blvd #43110
Pompano Beach, FL 33062

USA

Conference List

Journal of Empirical Studies

June 2020, Volume 7, 1, pp 30-40

Influence of Corporate Characteristics on Firm Leverage: Evidence from Bangladesh

S. M. Khaled Hossain

Jobaer Hossan Akib

Md. Matiur Rahman

S. M. Khaled Hossain¹

Jobaer Hossan Akib²
Md. Matiur Rahman³

Lecturer, Army Institute of Business Administration (AIBA), Savar Cantonment, Dhaka, Bangladesh. ¹

Undergraduate Student, Army Institute of Business Administration (AIBA), Savar Cantonment, Dhaka, Bangladesh. ²

Credit Analyst, IFIC Bank Limited, Dhaka, Bangladesh. ³

on Google Scholar

on PubMed

Pages: 30-40

DOI: 10.18488/journal.66.2020.71.30.40

Article History:

Received: 16 July, 2020
Revised: 18 August, 2020
Accepted: 04 September, 2020
Published: 29 September, 2020

View Citation

276Views

Create Citation Alert

Abstract:

The purpose of the paper is to explore the influence of various corporate characteristics on financial leverage of the manufacturing companies listed at Dhaka Stock Exchange (DSE) in Bangladesh. A non-probability sampling technique has been used for selecting sample size from the population. Data from 40 manufacturing companies has been analyzed from 2015 to 2019-time period which are secondary in nature. Multiple regression methods were implied to explore the impact of corporate characteristics on leverage of the studied firms. The output from the regression models indicated that total assets, return on assets, return on sales and age are inversely and significantly connected to the leverage of companies. Selecting only the manufacturing company as the sample is a little limitation for this study. The study period is only five years including year of 2015-2019. The research results of this paper make contributions for the regulatory and enforcement authorities such as: ICAB, ICMAB, SEC and DSE. The information derived from the findings of the study will help financial managers to take decision regarding selection of optimal capital structure.

Contribution/ Originality
This study contributes to the existing literature about the influence of corporate characteristics on companies’ financial leverage especially in reference to 40 manufacturing companies enlisted in DSE in Bangladesh.

Keywords:

Leverage, Liquidity, Return on assets, Corporate characteristics.

Reference:

Abobakr, M. G., & Elgiziry, K. (2016). The effect of board characteristics and ownership structure on the corporate financial leverage. Accounting and Finance Research, 5(1), 1-14. Available at: https://doi.org/10.5430/afr.v5n1p1.

Ahmad, N., Salman, A., & Shamsi, A. (2015). Impact of financial leverage on firms’ profitability: An investigation from cement sector of Pakistan. Research Journal of Finance and Accounting, 6(7), 2222-1697.

Ahmed, N., Ahmed, Z., & Ahmed, I. (2010). Determinants of capital structure: A case of life insurance sector of Pakistan. European Journal of Economics, Finance and Administrative Sciences, 24(24), 7-12.

Akinlo, O., & Asaolu, T. (2012). Profitability and leverage: Evidence from Nigerian firms. Global journal of Business Research, 6(1), 17-25.

Alfiyah, S. N. (2019). Effect of profitability and leverage on disclosure of corporate social responsibility in islamic commercial banks. Journal of Finance and Islamic Banking, 1(2), 133-149.

Bauer, P. (2004). Determinants of capital structure: Empirical evidence from the Czech Republic. Czech Journal of Economics and Finance (Finance a uver), 54(1-2), 2-21.

Bhuiyan, M. N. U., Hossain, S. M. K., & Akther, F. (2017). Environmental reporting practices and it's relationship with corporate characteristics: An evidence from manufacturing companies listed in Dhaka Stock exchange. The Cost and Management: The Journal of the Institute of Cost and Management Accountants of Bangladesh, 45(1), 3-11.

Chen, J. J. (2004). Determinants of capital structure of Chinese-listed companies. Journal of Business research, 57(12), 1341-1351.

De Jong, A., Kabir, R., & Nguyen, T. T. (2008). Capital structure around the world: The roles of firm-and country-specific determinants. Journal of Banking & Finance, 32(9), 1954-1969. Available at: https://doi.org/10.1016/j.jbankfin.2007.12.034.

Deesomsak, R., Paudyal, K., & Pescetto, G. (2004). The determinants of capital structure: Evidence from the Asia Pacific region. Journal of Multinational Financial Management, 14(4-5), 387-405. Available at: https://doi.org/10.1016/j.mulfin.2004.03.001.

Eriotis, N., Vasiliou, D., Vasiliou, D., & Neokosmidi, V. Z. (2007). How firm characteristics affect capital structure: An empirical study. Managerial Finance, 33(5), 321-331.

Ezeoha, A., & Botha, F. (2012). Firm age, collateral value, and access to debt financing in an emerging economy: Evidence from South Africa. South African Journal of Economic and Management Sciences, 15(1), 55-71.

Fama, E. F., & French, K. R. (2002). Testing trade-off and pecking order predictions about dividends and debt. The review of Financial Studies, 15(1), 1-33. Available at: https://doi.org/10.1093/rfs/15.1.1.

Fengju, X., Yari Fard, R., Ghassab Maher, L., & Akhteghan, N. (2013). The relationship between financial leverage and profitability with an emphasis on income smoothing in Iran's capital market. European Online Journal of Natural and Social Sciences, 2(3 (s)), 156-164.

Ghosh, S. (2008). Leverage, foreign borrowing and corporate performance: Firm-level evidence for India. Applied Economics Letters, 15(8), 607-616.

Gill, A. S., Mand, H. S., Sharma, S. P., & Mathur, N. (2012). Factors that influence financial leverage of small business firms in India. International Journal of Economics and Finance, 4(3), 33-45. Available at: https://doi.org/10.5539/ijef.v4n3p33.

Goyal, V. K., & Packer, F. (2017). Corporate leverage in emerging Asia. BIS Paper No. 91c.

Hall, G. C., Hutchinson, P. J., & Michaelas, N. (2004). Determinants of the capital structures of European SMEs. Journal of Business Finance & Accounting, 31(5-6), 711-728.

Hallajian, E., & Hashemi, M. (2016). Impact of firm size on leverage: An empirical study of companies listed on NSE of India. Management, 5(5), 99-101.

Hossain, S. K., Khan, M. R., & Haque, M. M. (2018). Corporate voluntary disclosure practices and its association with corporate attributes: An empirical investigation of listed and non-listed commercial banks in Bangladesh. International Journal of Managerial and Financial Accounting, 10(4), 331-351.

Huang, G., & Song, F. M. (2006). The determinants of capital structure: Evidence from China. China Economic Review, 17(1), 14-36.

Hussan, J. (2016). Impact of leverage on risk of companies. Journal of Civil & Legal Sciences, 5(4), 2169-0170.1000200.

Ibhagui, O. W., & Olokoyo, F. O. (2018). Leverage and firm performance: New evidence on the role of firm size. The North American Journal of Economics and Finance, 45, 57-82.

Ikechukwu, I. O., & Cyril, U. M. (2017). Effect of listing age on corporate financial leverage of oil and gas firms in Nigeria. International Journal of Economics, Finance and Management Sciences, 5(2), 92-102.

Kartikasari, D., & Merianti, M. (2016). The effect of leverage and firm size to profitability of public manufacturing companies in Indonesia. International Journal of Economics and Financial Issues, 6(2), 409-413.

Mazur, K. (2007). The determinants of capital structure choice: Evidence from Polish companies. International Advances in Economic Research, 13(4), 495-514.

Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261-297.

Myers, S. C. (2001). Capital structure. Journal of Economic perspectives, 15(2), 81-102.

Nurchaqiqi, R., & Suryarini, T. (2018). The effect of leverage and liquidity on cash dividend policy with profitability as moderator moderating. Accounting Analysis Journal, 7(1), 10-16.

Oduol, E. O. (2011). The relationship between liquidity and leverage of companies quoted at the NSE. Doctoral Dissertation.

Pratheepkanth, P. (2011). Capital structure and financial performance: Evidence from selected business companies in Colombo stock exchange Sri Lanka. Researchers World, 2(2), 171-183.

Rouf, M. A. (2018). Corporate characteristics and leverage: Evidence from Bangladesh. PSU Research Review, 2(1), 96-104

Saeedi, A., & Mahmoodi, I. (2011). Capital structure and firm performance: Evidence from Iranian companies. International Research Journal of Finance and Economics, 70, 20-29.

San, O. T., & Heng, T. B. (2011). Capital structure and corporate performance of Malaysian construction sector. International Journal of Humanities and Social Science, 1(2), 28-36.

Sarlija, N., & Harc, M. (2012). The impact of liquidity on the capital structure: A case study of Croatian firms. Business Systems Research, 3(1), 30-36.

Serrasqueiro, Z. M. S., & Rogão, M. C. R. (2009). Capital structure of listed Portuguese companies. Review of Accounting and Finance, 8(1), 54-75.

Sharif, B., Naeem, M. A., & Khan, A. J. (2012). Firms characteristics and capital structure: A panel data analysis of Pakistans insurance sector. African Journal of Business Management, 6(14), 4939-4947.

Sherif, M., & Elsayed, M. (2013). The impact of corporate characteristics on capital structure: Evidence from the Egyptian insurance companies. East African Journal, 6, 23-34.

Tamimi, M., & Takhtaei, N. (2014). Relationship between firm age and financial leverage with dividend policy. Asian Journal of Finance & Accounting, 6(2), 53-62. Available at: https://doi.org/10.5296/ajfa.v6i2.5910.

Tong, G., & Green, C. J. (2005). Pecking order or trade-off hypothesis? Evidence on the capital structure of Chinese companies. Applied Economics Letters, 37 (19), 2179-2189.

Vithessonthi, C., & Tongurai, J. (2015). The effect of firm size on the leverage–performance relationship during the financial crisis of 2007–2009. Journal of multinational financial management, 29, 1-29. Available at: https://doi.org/10.1016/j.mulfin.2014.11.001.

Viviani, J. L. (2008). Capital structure determinants: An empirical study of French companies in the wine industry. International Journal of Wine Business Research, 20 (2), 171-194.

Weill, L. (2008). Leverage and corporate performance: Does institutional environment matter? Small Business Economics, 30(3), 251-265. Available at: https://doi.org/10.1007/s11187-006-9045-7.

Yoon, E., & Jang, S. (2005). The effect of financial leverage on profitability and risk of restaurant firms. The Journal of Hospitality Financial Management, 13(1), 35-47. Available at: https://doi.org/10.1080/10913211.2005.10653798.

Zeitun, R., & Tian, G. G. (2007). Does ownership affect a firm's performance and default risk in Jordan? Corporate Governance: The International Journal of Business in Society, 7(1), 66-82.

Zelalem, D. (2020). The impact of financial leverage on the performance of commercial banks: Evidence from selected commercial banks in Ethiopia. International Journal of Accounting, Finance and Risk Management, 5(1), 62-68. Available at: https://doi.org/10.11648/j.ijafrm.20200501.16.

Zou, H., & Xiao, J. Z. (2006). The financing behaviour of listed Chinese firms. The British Accounting Review, 38(3), 239-258. Available at: https://doi.org/10.1016/j.bar.2006.04.008.