Abstract:
This study investigates the relationship between capital structure and firm
performance of listed manufacturing firms traded in Colombo Stock Exchange
in Sri Lanka that will be important to decision makers of the firm’s to identify
the optimum mix of debt and equity. The present study is proceed with the
sample of 30 manufacturing listed firms out of 40 companies using the data
represent the periods of 2010-2015. Firm performance is measured by using
Return on Asset (ROA) whereas Debt Equity Ratio (DER), Debt Asset Ratio
(DAR), Short Term Debt to Total Asset (STD/TA) and Long Term Debt Total
Asset (LTD/TA) were used as measures of capital structure. Descriptive
statistics, correlation and regression analysis were used to perform statistical
tests. The data was collected by using from 2010-2015 annual reports. Results
suggest that there is an insignificant negative relationship between DER and
firm performance of firms, and a significant positive relationship between
DER, STD/TA with financial performance measures.
