Abstract:
The study aims to investigate the impact of firm capital structure on the investment
growth of listed manufacturing firms in Sri Lanka. The data was gathered by using
secondary sources and the sample is confined to the manufacturing sector consists of
27 firms listed in the Colombo Stock Exchange using a random sampling method,
whereas Pearson’s correlation and multiple regression analysis were employed to
analyse the data for the period of 2012 to 2018. The independent variable, capital
structure, is measured by short-term debt, long-term debt and total debt, whereas the
dependent variable is investment growth. The results reveal that firm capital structure
has a strong and significant influence on listed manufacturing firms' investment
growth in Sri Lanka. Further, it shows that short-term debt and long-term debt were
found to have a significant and positive impact on investment growth while control
variables of profitability and firm size have no significant impact on the investment
growth of listed manufacturing firms in Sri Lanka. The study recommends that the
management of listed manufacturing firms increase the level at which the
organization uses long-term debt or short-term debt to finance its business activities.
This may increase the investment opportunity potentials of the organizations. Few
studies have addressed this area in the Sri Lankan economy.
