Title: Factors influencing capital structure decision of small firms in Bangladesh: an empirical evidence

Authors: Md. Nazmul Hossain; Quazi Sagota Samina

Addresses: East West University, A/2, Jahurul Islam Avenue, Aftabnagar, Dhaka-1212, Bangladesh ' East West University, A/2, Jahurul Islam Avenue, Aftabnagar, Dhaka-1212, Bangladesh

Abstract: This study has recognised some factors touching capital structure decision for small firms operating in Bangladesh. It confirms that few factors are significantly positively (asset tangibility and agency cost) and negatively (accounts receivable) related with capital structure whereas others are not commendably related (age of enterprise and liquidity). Account receivable, popularly referred to as an important element of business firms, is firstly announced as a determinant of capital structure decision. This study also finds that age of enterprise and asset tangibility support the trade-off theory (TOT), liquidity supports pecking order theory (POT), and accounts receivable supports free cash flow theory (FCFT). This study finds that the independent variables explain how capital structure is better for sole proprietorship firms than for partnership firms. Also for sole proprietorship firms, all the independent variables have statistically significant impact on capital structure whereas for partnership firms, only two independent variables show statistically significant relationship.

Keywords: capital structure determinants; small firms; capital structure theories; Bangladeshi enterprises; sole proprietorship and partnership business.

DOI: 10.1504/IJBDA.2022.126798

International Journal of Business and Data Analytics, 2022 Vol.2 No.2, pp.155 - 170

Accepted: 05 Jun 2022
Published online: 07 Nov 2022 *

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