Abstract: What is the optimum capital structure of the firm; this was argued by many economists from very long time. Some economist said there is positive relationship with firm value and capital structure. On the other hand, some economist said there is negative relationship with organization capital structure and value for firms.
When we reviewed the literature and prolonged our understanding of these theories and hypotheses, we found that the relationship between capital structure and firm performance is interesting aspect and worthwhile to research. Therefore, this study started an extensive literature review and found a research gap, which is the relationship between capital structure and a firm's value from the perspective of capital structure theories in the Sri Lankan context during the period 2010-2015. Since researchers investigate the relationship between capital structure and firm performance in many different countries and there is nothing in the Swedish context, there for thus decided to write the thesis about it.
This study is based on the three volatile business sectors in the country. Only listed firms in telecommunication industry, construction and engineering sector and footwear and textile companies’ financial data used for this study. Five years of financial data taken for this analysis from 2010/11 to 2015/16 years. From these selected firms analysed profitability and performance ratios with capital components to find how capital structure help to increase firm value.
The study found that in construction sector return on assets has a positive relationship with short term debt. Earnings per share have positive relationship with long term debt. In the footwear industry return on assets and equity have negative relationship with short term debt and positive relationship with long term debt. Dividend per share has negative relationship with number of shares. In the telecommunication sector have positive relationship with return on assets and debt to equity ratio. Earnings per share have negative relationship with debt-to-equity ratio and number of shares. Return on equity has positive relationship with debt-to-equity ratio and number of shares
Based on the findings it is advised that construction and footwear and textile industry is better to invest using debt financing. Currently have 26% mean of debt-to-equity ratio in these industries. Telecommunication industry it is better to invest using internal source and better to reduce debt to equity ratio. Currently have 33% of mean debt to equity ratio.
Keywords: The author gives 4 – 10 keywords which are related to the major part of their research work.
Title: An empirical study on the impact on firm value and capital structure Listed companies in the Construction, telecommunication and footwear and textile industries in the Sri Lanka
Author: Bamunusinghage Kolitha Dilantha Perera
International Journal of Thesis Projects and Dissertations (IJTPD)
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