THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE AND FIRM PERFORMANCE IN THE FOOD INDUSTRY OF AN EMERGING AGRO-BASED ECONOMY

Abstract

This study examines the relationship between capital structure and financial performance of food and allied companies listed in the Dhaka Stock Exchange (DSE) from an agro-based emerging economy perspective. A sustainable food industry is crucial for the economic growth and food security of Bangladesh. The paper aims to contribute to the ongoing debate on capital structure and firm performance by investigating the relationship between capital structure and companies' financial performance from the food industry perspective. Accounting-based measures like ROA, ROE, and EPS are used as dependent variables, while short-term debt to total assets ratio and long-term debt to total assets ratio are used to represent the capital structure. Control variables like firm size, firm age, sales growth, liquidity, and tangibility were considered to explain the profitability of the firms. The study uses pooled OLS, random-effects model (REM), and fixed-effects model (FEM) to estimate the regression model. The results show that capital structure significantly influences ROA, while there is no significant relationship between capital structure and ROE and EPS