Capital structure determinants: a case of Manufacturing Firms in Tanzania

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University of Dar es Salaam
Capital structure decision is crucial for firm value maximization and shareholder wealth maximization. The optimal capital structure decision is still a debatable topic in corporate finance since Modigliani and Miller (1958). However, most of researches that focused on capital structure determinants in Tanzania have not covered the determinants of capital structure decision on manufacturing firms as a separate segment. Therefore, this study attempted to add on capital structure literature by analysing capital structure determinants of manufacturing firms in Tanzania. The analysis utilised secondary data collected from six manufacturing firms that are listed in DSE and covers ten years from 2007 to 2016. The study employed panel data analysis in which fixed effects model was applied. The factors tested were: firm size, profitability, age of a firm, asset tangibility, risks, liquidity, non-debt tax shields, growth opportunity, and dividend pay-out. The empirical results exhibit that profitability, asset tangibility, non-debt tax shields and firm size are the key determinants of capital structure decisions of manufacturing firms in Tanzania. However, business risk, dividend pay-out, liquidity, and growth opportunity have insignificant impact on capital structure of a firm. Furthermore, the study recommends that in making decisions about capital structure, managers should contemplate on firm-specific characteristics for value maximisation.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HD9940.U6.T34M56)
Manufacturing, Manufacturing industries, Manufacturing firms, Tanzania
Mboya, L.A (2018) Capital structure determinants: a case of Manufacturing Firms in Tanzania.Master dissertation, University of Dar es Salaam, Dar es Salaam.