Universal Journal of Accounting and Finance Vol. 4(4), pp. 130 - 135
DOI: 10.13189/ujaf.2016.040403
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Capital Structure and Profitability of Bangladeshi Firms: A Causal Investigation

Zahid Anowar ^*
School of Business Studies, Southeast University, Bangladesh

ABSTRACT

This study attempts to investigate the relationship between capital structure and profitability for a sample of 40-firm listed on Dhaka Stock Exchange (DSE) during the period of 1998-2013. Granger causality shows that bidirectional causality exists between firm size (FS) and profitability (ROA) in the short run. A large size firm has more scope to make more profit. Bidirectional causality also exists between liquidity and profitability. A more profitable company can uphold better liquidity without depends on external fund. However, unidirectional causality exists between capital structure and liquidity in the short run. This finding indicates liquid firms have less preference for debt in the short run. Moreover, unidirectional causality also exists among profitability to capital structure and firm size to liquidity in the short run. POLS fixed and random effects have been employed to check the relationship between capital structure and profitability and findings confirm that profitability, firm size and liquidity have statistically significant relationship with capital structure.

KEYWORDS
Capital Structure, Leverage, Profitability, FMOLS, Dhaka Stock Exchange

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Zahid Anowar , "Capital Structure and Profitability of Bangladeshi Firms: A Causal Investigation," Universal Journal of Accounting and Finance, Vol. 4, No. 4, pp. 130 - 135, 2016. DOI: 10.13189/ujaf.2016.040403.

(b). APA Format:
Zahid Anowar (2016). Capital Structure and Profitability of Bangladeshi Firms: A Causal Investigation. Universal Journal of Accounting and Finance, 4(4), 130 - 135. DOI: 10.13189/ujaf.2016.040403.