Capital Structure Management in Nepalese Enterprises

Abstract:     
This study attempts to explain the capital structure pattern and its determinants for a penal set of 20 non-financial firms listed in NEPSE for 1992-2004. By using decompositional analysis, properties of portfolio analysis, econometric analysis and opinion survey of managers, it is found that Nepalese firms are highly levered, however the long-term debt ratio is significantly low. Assets structure and size are observed positively related to leverage where as liquidity, risk, growth, non-debt tax shield are negatively related to leverage. The signs of estimates suggest that both pecking order and tradeoff theories are at work in explaining capital structure of Nepalese companies. Also, the macroeconomic factors GDP, inflation and capital market influence in firm's capital structure decisions. Opinion survey analysis shows that Nepalese managers prefer internal financing first followed bank loan financing.

Number of Pages in PDF File: 109

Keywords: capital structure, tradeoff theory, pecking order theory

JEL Classification: G32

working papers series