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HOW FIRMS CHARACTERISTICS AFFECT FINANCIAL LEVERAGE: AN ANALYSIS OF PHARMACEUTICALS AND CHEMICAL INDUSTRY OF BANGLADESH

Kumar Debasis Dutta

Abstract

Financial leverage indicates to the proportions of fixed income securities especially debt that a firm employs to fund its operation. Many elements have been proven to influence strongly the firm’s leverage. As many studies have tested and revealed conflicts, the validity of theoretical determinants needs to be examined further. This paper aims to examine the validity of eight chosen leverage determinants for pharmaceuticals and chemicals industry of Bangladesh. Financial data of this industry are analyzed either to confirm or refute the assumptions of correlation between selected determinants and leverage. The study employs the quantitative research design, which is a combination of deductive approach, quantitative method and experimental strategy. The findings statistically confirm the negative relationships of growth, size and tangibility and positive relationships of earning volatility, DOL, and DFL with leverage respectively.