Capital structure and firm performance in emerging economies: an empirical analysis of Sri Lankan firms
This paper offers an empirical analysis of the impact of capital structure on firm performance in thecontext of an emerging marketÃÂ¿Sri Lanka. The study applies both pooled and panel data regressionmodels for a sample of 155 Sri Lankan-listed firms. The results demonstrate that most of the SriLankan firms finance their operations with short-term debt capital as against the long-term debtcapital and provide strong evidence that the firm performance is negatively affected by the use of debtcapital. The study also finds a significant negative relationship between tangibility and performanceindicating inefficient utilization of non-current assets. The negative performance implicationsassociated with over-utilization of short-term debts and the under-utilization non-current assetsprovide corporate managers with useful policy directions.
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