Preprint Article Version 1 NOT YET PEER-REVIEWED

The Effect of Capital Structure on Firms’ Profitability (Evidenced from Ethiopian)

  1. Department of Accounting & Finance, Wollega University, Nekemte, Ethiopia
Version 1 : Received: 8 July 2016 / Approved: 8 July 2016 / Online: 8 July 2016 (10:42:31 CEST)

How to cite: Negasa, T. The Effect of Capital Structure on Firms’ Profitability (Evidenced from Ethiopian). Preprints 2016, 2016070013 (doi: 10.20944/preprints201607.0013.v1). Negasa, T. The Effect of Capital Structure on Firms’ Profitability (Evidenced from Ethiopian). Preprints 2016, 2016070013 (doi: 10.20944/preprints201607.0013.v1).

Abstract

This study was aimed to investigate the effect of capital structure on firms’ profitability with special emphasis on Ethiopian Large Private Manufacturing Firms using panel data of five consecutive years (2006/07-2010/11G.C). The secondary data sources (audited financial statements) have been collected from the randomly selected thirty three large private manufacturing firms in Ethiopia. Linear regression model has been employed to analyze the relationship between firms’ profitability and capital structure. Specifically, Random-effect Generalized Least Square of panel data regression model has been selected to empirically test the literature driven hypotheses. Finally, the findings of this study revealed that a significant positive relationship between firms’ profitability and total debt ratio which indicate firm’s capital structure.

Subject Areas

capital structure, total debt ratio, profitability, return on assets, firms, Ethiopia

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