The Determinants of Capital Structure Choice: Evidence from Bangladeshi FMCG Companies

Abstract

This paper offers empirical proof of Bangladesh's theories of capital markets and analyses the effects of the failure to introduce a secondary capital market in relation to Bangladesh. The findings from the cross-sectional OLS regression demonstrate that both the static deal theory and the cost theory of the organisation are applicable to the capital structure of the Bangladesh Fast-moving consumer goods (FMCG) companies. The lack of a secondary market will affect the costs of an entity because shareholders unable to decommission their shares may place pressure on management to behave in their best interests. We analyse in this paper, using a sample of 5 Bangladeshi FMCG companies for the period from 2014 to 2019, the determinants of Bangladesh's Debt to Total Asset. This study reveals that Bangladesh's listed Food and Allied company's average leverage ratio is close to that of other countries in the growth of the economy. The study also shows that the Company's Profitability is strongly and positively linked to the asset structure, Size, Profitability, growth and business risks. A firm's Size has a statistically significant negative impact on Debt to Total Asset.