Title: Debt and profitability: evidence from Bangladesh

Authors: Mumtahina Islam; G.M. Wali Ullah

Addresses: Department of Economics, School of Business and Entrepreneurship, Independent University, Bangladesh (IUB), Dhaka, 1212, Bangladesh ' Department of Finance, School of Business and Entrepreneurship, Independent University, Bangladesh (IUB), Dhaka, 1212, Bangladesh

Abstract: This study investigates the relationship of different capital structure determinants with the profitability of multinational companies (MNC) in order to determine the optimal choice of the capital structure. We have used the financial statements of 10 MNC listed in the Dhaka Stock Exchange (DSE) in Bangladesh in the year 2006-2017. The profitability is measured using the return on assets (ROA) and the return on equity (ROE). Data are analysed using multiple panel regression which reveals that the financial ratios, namely, the long term debt (LTD) and debt to equity (DE) are the significant variables in predicting the optimal capital structure of those MNC. The research findings imply that MNC financial managers should avoid long-term debt financing and therefore rely more on short-term financing options from the perspective of the capital market in Bangladesh.

Keywords: optimising capital structure; MNC; multinational companies; Bangladesh; Dhaka Stock Exchange.

DOI: 10.1504/IJMEF.2020.109995

International Journal of Monetary Economics and Finance, 2020 Vol.13 No.4, pp.362 - 382

Received: 02 Jul 2019
Accepted: 05 Apr 2020
Published online: 30 Sep 2020 *

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