Impact of firm characteristics on Capital Structure of Banking Industry of Bangladesh

Abstract

This study attempts to investigate the impact of firm characteristics on capital structure of banking industry of Bangladesh where includes 47 banks for the period of 2008 to 2012. This research has been conducted on the basis of secondary information and for conducting smooth analysis data has been collected from different sources such as annual reports, articles and publications etc. We tried to find out whether there is any association between firm characteristics and capital structure of banking industry of Bangladesh and which capital structure theory is applicable for banking industry to take financing decision. Capital Adequacy Ratio (CAR), debt to asset, debt to equity and elements of capital structure are also tried to investigate by using mean, standard deviation, variance and regression analysis by using SPSS software. We selected debt to asset ratio as dependent variable and size, liquidity, tangibility of asset and profitability as independent variables and there are found a negative significant correlation between debt to asset ratio and tangibility of asset that is why Pecking order theory is more applicable and suitable for taking financing decision compare to Trade off theory and Agency cost theory