Impact of capital structure on firm’s value: Evidence from Bangladesh

Anup Chowdhury () and Suman Paul Chowdhury ()
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Anup Chowdhury: BRAC Business School, BRAC University, Bangladesh.
Suman Paul Chowdhury: BRAC Business School, BRAC University, Bangladesh.

Business and Economic Horizons (BEH), 2010, vol. 3, issue 3, 111-122

Abstract: Modigliani & Miller (1958) show the impact of debt-equity ratio on firm value in their capital structure theory. Economist and financial researchers have spent time to develop new thoughts around this theory. Despite their effort the Modigliani & Miller (MM) model is still in vague. In this paper attempt has been made to empirically support the argument of MM. The paper tests the influence of debt-equity structure on the value of shares given different sizes, industries and growth opportunities with the companies incorporated in Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) of Bangladesh. For the robustness of the analysis samples are drawn from the four most dominant sectors of industry i.e. engineering, food & allied, fuel & power, and chemical & pharmaceutical to provide a comparative analysis. A strong positively correlated association is evident from the empirical findings when stratified by industry.

Keywords: Capital structure; firm value; wealth maximization; time series; leverage decision. (search for similar items in EconPapers)
JEL-codes: G1 G3 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (33)

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