Do Determinants Influence the Capital Structure Decision in Bangladesh? A Panel Data Analysis

Authors

  • Mohammad Nazim Uddin Department of Business Administration, International Islamic University Chittagong, Kumira, Bangladesh
  • Mohammed Shamim Uddin Khan Department of Finance, University of Chittagong, Bangladesh
  • Mosharrof Hosen Department of Accounting and Finance, UCSI University, Malaysia

DOI:

https://doi.org/10.33736/ijbs.4868.2022

Keywords:

Firm size, liquidity, asset tangibility, capital structure decision

Abstract

More than two decades, capital structure decision marked as variation from optimal decisions as determinants are not properly considered due to the collapse of corporate governance. This study examines the impact of determinants on capital structure decisions in Bangladesh using Fixed-Effect Model (FEM) and Panel Corrected Standard Error (PCSE). The study revealed that debt structure is considerably influenced by liquidity, firm size, asset structure, non-debt tax shield, and operational age of companies. The study also indicates that the companies, which are not financially, sound, but used more debt because the owners of such companies are politically empowered in stock market. The firms that hold less fixed assets (as a percentage of total assets, particularly the family-run and politically affiliated firms used more debt regardless of their tax bracket, profitability and growth—showed a greater capacity for increased debt. This study primarily focused on financial framework to make capital structure decision based on related determinants.

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Published

2022-08-08

How to Cite

Mohammad Nazim Uddin, Mohammed Shamim Uddin Khan, & Mosharrof Hosen. (2022). Do Determinants Influence the Capital Structure Decision in Bangladesh? A Panel Data Analysis. International Journal of Business and Society, 23(2), 1229–1248. https://doi.org/10.33736/ijbs.4868.2022