Factors Affecting Capital Structure: A Study on DSE Listed Textile Sector of Bangladesh
Keywords:
Asset turnover, Capital intensity ratio, Debt financing, Profitability, Size of the firm, Textile sector, Return on capital employedAbstract
Debt financing in a company's capital structure is a significant source of funding in the textile sector of Bangladesh. Almost all businesses use debt financing in their capital structure to get tax blessings and increase profitability. Given the widespread use of debt as a financing source, the study's objective is to identify the aspects influencing capital structure in the Bangladeshi textile sector. The study is based on secondary data. Regression analysis is applied to identify the factors affecting capital structuring. The study found that profitability affects the proportion of debt financing in capital structure, whereas the firm's size, capital intensity ratio, asset turnover, and return on capital employed do not affect capital structure. The study's findings suggested that managers should make prudent decisions regarding changes in the capital structure, considering the impact of the firm's profitability, which would help suggest financial reforms for the textile sector. Managers of large, profitable companies can use the tax benefits of debt, as well as its disciplinary role, to increase corporate value.
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