Determinants of Capital Structure Choices for Listed Manufacturing Companies in Bangladesh

Abstract

The study attempts to investigatethe firm specific determinants to explore capital structure choices by using paneldata model for 63 DSE listed manufacturing companies during 2008 to 2012. The FGLSpanel data analysis reveals that determinants assumed under pecking order theoryhave dominating influence on leverage in Bangladesh and short term debt is preferredto long term debt as a source of financing. The implication of this study under transitional economic and infrastructuraloutset profitable firm should finance its project through internally generated fundswithout changing present situation rather availing greater debt capacity as wellas without changing its control scenario. If there is lack of available internalfunds (retained earnings), firm’s manager should be prudent enough to decide rightchoices for financing at that time without inclining to any specific one (only debtor only new stock).Keywords: Capital Structure, Pecking order theory, FGLS.