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Financial Risk and Management Reviews

June 2020, Volume 6, 1, pp 40-51

Factors Affecting the Capital Structure of the Textile Industry in Bangladesh: An Inferential Study

Aysha Ashraf

,

Sonia Rezina

Aysha Ashraf 1
Sonia Rezina 2


  1. Assistant Professor of Finance, School of Business, Asian University of Bangladesh. 1

  2. Assistant Professor, School of Business, Uttara University, Dhaka, Bangladesh. 2

on Google Scholar
on PubMed

Pages: 40-51

DOI: 10.18488/journal.89.2020.61.40.51

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Article History:

Received: 19 May, 2020
Revised: 22 June, 2020
Accepted: 24 July, 2020
Published: 17 August, 2020


Abstract:

The main objective of the study is to recognize the major factors influencing the capital structure of the textile firms and to identify the association among them from the context of Bangladesh. The researchers reviewed different conditional theories of capital structure before identifying the determinants of the textile firms. For this purpose, panel data for A-category listed textile companies of the Dhaka Stock Exchange were selected. The study developed multiple regression models for the period 2008 to 2017. Key -independent variables include firm profitability, tangibility, growth, age, liquidity and Size. Leverage ratio was used as the dependent variable. The study explored that profitability; firm size and liquidity have significant positive relationship with the debt ratio, which is consistent with the Trade-off theory. On the other hand, tangibility, growth rate and age are not significantly related with the said ratio. The findings of this study will help financial managers to make the right decisions on fund borrowing and equity financing. Then they can use borrowing in a proper way to support the market value of their companies.
Contribution/ Originality
This study is one of the very few studies which have investigated the direct relationship of determinant factors with the debt maturity of the listed textile companies in the stock exchange by using panel data analysis.

Keywords:

Capital structure, Trade-off theory, Leverage, Profitability, Tangibility, Textile industry, Bangladesh.

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Statistics:

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Funding:

This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.

Acknowledgement:

Both authors contributed equally to the conception and design of the study.

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