| Abstract [eng] |
Understanding how capital structure can affect firms’ cost of capital and value has long been a central issue in the field of corporate finance. Vast evidence has been found in the literature in the favour of the claim that capital structure of a listed firm (that using debt component in its capital base) can affect its cost of capital and market value significantly. Literature suggests multiple theories, e.g., agency theory, capital structure theory, pecking order theory, trade off theory, etc., to depict the impacts of capital structure on firms’ cost of capital and market value. With the motivation to check whether the claim applies to the listed firms in an emerging economy, this study aims to evaluate how the variations in Bangladeshi listed firms’ capital structure affect their overall market value and cost of capital. The theoretical framework of the study stands on the propositions suggested by the capital structure theory of Modigliani and Miller, and the concept of weighted average cost of capital. The study employed a quantitative design and used secondary sources to collect the required data for the investigation. The population of the study are the listed firms on the DSE, and a sample of 20 listed firms from 5 different sectors were selected for data collection. A purposive sampling technique was used in this regard. The data collection period covered from 2015 to 2024 making the sample consisting 200 firm-year observations. Five hypotheses have been stemmed from the key bodies of literature reviewed related to this research, and the validity of these hypotheses has been tested using Ordinary Least Squares (OLS) regression analysis using IBM SPSS Statistics v.22. The results of hypothesis testing indicates that in the context of an emerging economy like Bangladesh, it is inferred that listed firms’ capital structure influences their cost of capital and firm value with statistical significance. However, the moderation of cashflow stability of the firms did not have any statistically significance, while the moderation of default risk and access to financing had statistical significance. |
