Social and Behavioral Sciences Commons^™

Capital Structure And Its Implications: Empirical Evidence From An Emerging Market In South Asia, Athula Manawaduge, Anura De Zoysa, Palli Mulla K A Chandrakumara

Anil Chandrakumara

Using panel data regression analysis for a sample of 171 companies, this paper examines the implications of capital structure of corporate entities in an emerging market, Sri Lanka. The results demonstrate that most of the Sri Lankan firms finance their operations with short-term debt capital as against the long-term debt capital. It provides strong evidence to indicate that debt capital has a negative impact on firm performance. The study also found a significant negative relationship between tangibility and performance indicating inefficient utilization of non-current assets. The negative performance implications associated with over-utilization of short-term debts and the under-utilization non-current assets …