Effect of Capital Structure on the Financial Performance of Ethiopian Food and Beverage Manufacturing Firms Industry
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Date
2018-12
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Addis Ababa University
Abstract
The purpose of this thesis is to provide evidence on the effect of capital structure on the
financial performance of food and beverage manufacturing companies categorized under
large tax payer in Ethiopia. The study applied explanatory research design and panel data
regression analysis. In order to answer the research question, secondary data was collected
from the sample of thirteen large tax payer food and beverage manufacturing companies
covering five years period (2013-2017). In the present study, able to examine the effect of
capital structure variables with two financial performance measuring variables (ROA and
ROE) and long term debt and short term debt as a capital structure variables and also
growth, firm size, asset tangibility from firm specific and inflation from macroeconomic
factors are included as a control variables. E-Views version 10 software packages was used
to make regression analysis. The finding from capital structure variables indicates: long term
debt has a significant negative effect on financial performance of FBMCs but short term debt
has insignificant positive effect, and from control variables growth and firm size has a
significant positive relation, asset tangibility has also a significant but negative effect.
However inflation rate has no significant effect on financial performance of Ethiopian Food
and Beverage Manufacturing (FBMCs). Finally, the researcher make recommends for
financial managers to do not use excessive amount of debt in their capital structure and to
finance their projects with retained earnings first and take long term debt as a last option, for
future researcher to consider market performance measures and for universities to initiate
students to do more researches on this topic.
Description
A Thesis to Addis Ababa University College of Business and Economics
Department of Accounting and Finance in Partial Fulfillment of the
Requirements for the Degree of Master of Science in Accounting and
Finance
Keywords
Capital Structure, Long Term Debt, Return on Equity, Short Term Debt