Abstract:
It is mostly due to the factors that decide the overall capital structure of the company.
A greater capital structure helps the company realize both sustainable long-term
Growth and long-above average results. The objective of this study is to find out the
relation between capital structure and debt ratio of manufacturing companies listed
in the Colombo Stock Exchange. Thus, the study was considered with panel data for
the period of 2011– 2015 of the twenty six companies. Correlation, and multiple
regression analysis of statistical tools were used to analyze and to test the hypothesis
of the study. In this analysis, the dependent variable is the debt ratio of the firms and
the Capital structure determinants, which are measured by Profitability, Tangibility,
firm size, Growth, and non-debt tax shield. The results showed that Profitability,
Growth, Firm Size, and Non-Debt Tax shield have significant impact on debt ratio
except Tangibility. Further, it finding showed that the firm size mostly consistent with
trade-off theory and profitability and growth consistent with packing order theory and
prove past empirical findings also.
