Determinants of Capital structure for manufacturing companies: A case of selected manufacturing companies in Addis Ababa City

Abstract

Capital Structure is influenced by a number of factors. Vast amount of empirical researches conducted on the determinants of capital structure for cost effective mix of capital; to see examine that of Ethiopia, an endeavor has been made in this paper to examine the relevance of theoretical internal (firm level) factors determine capital structure of manufacturing share companies in Addis Ababa, Ethiopia for which the researcher has used nine explanatory variables , Liquidity, Non-Debt Tax Shield, Growth, Tangibility, Profitability, Age, Size, Earning Volatility and Capital Intensity. Data of 15 manufacturing Companies as a sample were taken and secondary data was collected from audited financial statements of selected companies for the period of six years (2009-2014 GC). Explanatory type of research design is used. Due to the problem of getting data judgemental sampling was employed. Data was then analyzed on quantitative basis using multivariate regression using SPSS V21. The results show that Liquidity, non debt tax shields, firm size, Age of the firm, and capital intensity variables are the significant determinants of capital structure of Addis Ababa manufacturing share companies. Profitability significantly affects the long term debt only. While no clear and statistical proved relation are obtained for the variables Growth of