Impact of capital structure on working capital management: evidence from capital goods sector in Colombo stock exchange

Abstract

This study is intended to examine the impact of Capital Structure on Working Capital Management, an application on Capital goods companies listed in Colombo Stock Exchange. Data for the study is collected from 145 annual reports which are related to 29 Capital goods companies listed in Colombo Stock Exchange for five years from 2014 to 2018.Capital Structure is used as independent variable for the study while Working Capital Requirement (WCR) is used as the dependent variable. Controlling variables of this study are Firm Size (FS) and Return on Equity (ROE). Regression analysis is used for hypothesis testing. The result of this study shows that Debt to Equity ratio has a negative and significant impact on Working Capital Requirement from regression analysis. Finally, researchers conclude that there is a significant negative impact of Capital Structure on Working Capital Management of Capital goods companies in Sri Lanka.