FACTORS INFLUENCING CAPITAL STRUCRTURE OF MANUFACTURING COMPANIES LISTED AT DAR ES STOCK EXCHANGE(DSE)

Abstract

The aim of this study is to examine the factors which influence the capital structure of the non-financial companies listed at Dar-es-Salaam Stock Exchange. Theories adopted by this study were pecking order theory and trade off theory. The study used a sample of five manufacturing companies listed at Dar es Salaam Stock Exchange, to represent all listed manufacturing companies, and it covered the period of 10 years from 2009 to 2018. Data used in the study were collected from the annual report and financial statements of the selected manufacturing companies. One measure of capital structure was used to determine the leverage of manufacturing companies. Firm specific determinants of capital structure which are profitability, asset tangibility, and liquidity were used as predictor variables, a panel regression between dependent and independent on was used to analyze the relationship existing variables. Results from the multiple regression show that profitability was significant and negatively related to leverage. The results also revealed that, asset tangibility was positively negatively related to level and insignificantly related to leverage. Also, evidence from fixed-effect regression mode\ found liquidity to be negatively and insignificantly related to the leverage, which implies that liquid refer to use internal resources rather than debt financing which is seen ng manufacturing firms p to be reliable according to the Pecking Order Theory, Thus, manufacturing firms used in this study were found to choose more internal sources to fund their new investment, and that when of internal retained earnings were not available, firms were selecting short-term sources funding rather than long- term debt. In addition, the cap structure the manufacturing companies consists of a limited amount of debt cap\ta\. The study suggests that bus\nesses raise their income in order to ensure that they benefit economically 1^01-n their operations, as revenues make a substernal cont6bution to the company’s capital structure.