EFFECTS OF SELECTED COMPANY-SPECIFIC VARIABLES IN THE DETERMINATION OF COMPANY LEVERAGE: EVIDENCE FROM TEXTILE INDUSTRY OF BANGLADESH
Keywords:
Leverage, Profitability, Size, Liquidity, Asset turnover, Tangibility.
Abstract
The purpose of this study is to investigate the effects of profitability, liquidity, size, tangibility, and asset turnover on the leverage of the textile industry of Bangladesh. This paper analyzed 20 companies out of 56 companies listed in the Dhaka Stock Exchange. The data set is for the periods from 2016 to 2019. To find the effects on the dependent variable, the Fixed Effects Model has been used which has been selected using the Hausman test. To test heteroskedasticity, the Breusch-Pagan heteroskedasticity test has been used. The study found size, profitability, and tangibility having a significant effect. While size and tangibility have a positive impact on leverage, profitability has a negative impact. The findings are diversified in nature. The results are not all consistent with the previous studies conducted in different developing countries. So, the policymakers should have in-depth insights while making decisions.
References
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Thippayana, P. (2014). Determinants of Capital structure in Thailand. Procedia Social and Behavioral Sciences, 143, 1074-1077.
Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. Journal of Finance, 43(1), 1-19.
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Akhtar, S. (2005). The Determinants of Capital Structure for Australian Multinational and Domestic Corporations. Australian Journal of Management, 30(2), 321-341.
Chadha, S., & Sharma, A. K. (2016). Capital Structure and Firm Performance: Empirical Evidence from India. The Journal of Business Perspective, 19(4), 295-302.
Dakua, S. (2019). Effect of determinants on financial leverage in Indian steel industry: A study on capital structure. International Journal of Finance & Economics, 24(1), 427-436.
Dugan, M. T., Medcalfe, S. K., & Park, H. S. (2018). A reconsideration of operating-financial leverage tradeoff hypothesis. Journal of Financial Economic Policy, 10(4), 473-483.
Frank, M. Z., & Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67, 217-248.
Frank, M. Z., & Goyal, V. K. (2009). Capital Structure Decisions: Which Factors Are Reliably Important? Journal of Financial Management, 38(1), 1-37.
Gomez, A. P., Castro, G. A., & Ortega, M. F. (2016). Determinants of leverage in mining companies, empirical evidence for Latin American countries. Contaduría y Administración, 61(1), 26-40.
Gropp, R., & Heider, F. (2010). The Determinants of Bank capital structure. Review of Financial Journal, 14(4), 587-622.
Hossain, F., & Ali, A. (2012). Impact of Firm Specific Factors on Capital Structure Decision: An Empirical Study of Bangladeshi Companies. International Journal of Business Research and Management (IJBRM), 3(4), 163-182.
Hutchinson, R., & Hunter, R. (1995). Determinants of capital structure in the retailing sector in the UK. The International Review of Retail, Distribution and Consumer Research, 5(1), 63-78.
Kizildag, M., & Ozdemir, O. (2017). Underlying factors of ups and downs in financial leverage overtime. Tourism Economics, 23(6), 1321-1342.
Kraus, A., & Litzenberger, R. (1973). A State-Preference Model of Optimal Financial Leverage. Journal of Finance, 28(4), 911-922.
Mayers, S. (2003). Financing of corporations. Handbooks of the Economics of Finance, 1(1), 216-253.
Mayers, S., & Majluf, N. (1984). Corporate financing and investment decisions when frms have information that investors do not have. Journal of Financial Economics, 13(2), 187-224.
Mazur, K. (2007). The determinants of capital structure choice: Evidence from Polish companies. Int Advanced Econ Res, 13(4), 495-514.
Nivorozhkin, E. (2002). Capital Structures in Emerging Stock Market: the Case of Hungary. The Developing Economies, 40(2), 166-187.
Onofrei, M., Tudose, M. B., Durdureanu, C., & Anton, S. G. (2015). Determinant Factors of Firm Leverage: An Empirical Analysis at Iasi County Level. Procedia Economics and Finance, 20, 460-466.
Ozkan, A. (2001). Determinants of Capital Structure and Adjustment to Long Run Target: Evidence from UK Company Panel Data. Journal of Business Finance & Accounting, 28(1-2), 175-198.
Rajan, R. G., & Zingales, L. (1995). What Do We Know about Capital Structure? Some Evidence from International Data. The Journal of Finance, 50(5), 1421-1460.
Serghiescu, L., & Vaidean, V. L. (2014). Determinant factors of the capital structure of a firm- an empirical analysis. Procedia Economics and Finance, 15, 1447-1457.
Shah, A., & Khan, S. (2007). Determinants of Capital Structure: Evidence from Pakistani Panel Data. International Review of Business Research Papers, 3(4), 265-282.
Shah, A., & Khan, S. (2007). Determinants of Capital Structure: Evidence from Pakistani Panel Data. International Review of Business Research Papers, 3, (4), 265-282.
Sheikh, N., & Wang, Z. (2010). Financing Behavior of Textile Firms in Pakistan. International Journal of Innovationa, Management and Technology, 1(2), 130-135.
Thippayana, P. (2014). Determinants of Capital structure in Thailand. Procedia Social and Behavioral Sciences, 143, 1074-1077.
Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. Journal of Finance, 43(1), 1-19.
Zeitun, R., & Saleh, S. A. (2015). Dynamic performance, financial leverage and financial crisis: evidence from GCC countries. EuroMed Journal of Business, 10(2), 147-162.
Published
2021-08-23
How to Cite
Arif, M. A. (2021). EFFECTS OF SELECTED COMPANY-SPECIFIC VARIABLES IN THE DETERMINATION OF COMPANY LEVERAGE: EVIDENCE FROM TEXTILE INDUSTRY OF BANGLADESH. Asian Finance & Banking Review, 5(1), 19-29. https://doi.org/10.46281/asfbr.v5i1.1298
Section
Original Articles/Short Communications
Copyright (c) 2021 Md. Asaduzzaman Arif
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