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PHD THESIS TOPIC:
THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE THEORIES AND CAPITAL STRUCTURE DECISIONS OF FIRMS LISTED ON UGANDA SECURITIES EXCHANGE
The Study investigated the relationship between capital structure and capital structure decisions of 14 firms listed on Uganda Securities Exchange as of December 2010. It aimed at examining how firms existing capital structure relates to the decisions to issue or to issue, Equity or Debt. The study provided an overview of three sets of capital structure theories that tend to explain the link between capital structure and the financing decisions of firms.
Cross sectional survey design was employed, and Graham (2001) survey model was used to assess the capital structure decisions of listed firms. Analysis of both Primary and secondary data was conducted using SPSS to arrive at conclusions. Results revealed that existing capital structure of companies listed on USE is significantly related to the capital structure decisions they take. The nature of the relationship further revealed firms’ prioritized use of retained earnings and equity when debt cannot be accessed. Use of debt or equity affects a firm’s ability to time the equity market, and firms rebalance their capital structure incase of any deviation from their target debt level. This showed that firms practically consider some of the issues sighted in the capital structure theories when coming up with their financing decisions.
It was further noted that the capital structure of the companies is related to the cost of capital, which in the end affects capital structure decision to be taken by the firm given the objective of maximizing firm’s value. Results of the study could be useful in opening a platform to especially corporate managers, for aligning financing decisions and capital structure to other structural characteristics aimed at enhancing performance of company, in order to attain wealth maximization objective.