The Impact of Firm Size on Capital Structure Decisions, with Corporate Governance as a Moderator

  • T.D.S.H. Dissanayake
  • A.D.M Dissanayake
  • K.M.P. Perera


The capital structure of any company is crucial in determining its financial decisions. Furthermore, the size of the company influences capital structure decisions, and the scope of capital structure should be governed by corporate governance. As a result, the purpose of this research was to investigate the effect of firm size on capital structure decisions in Sri Lanka and the moderating effect of corporate governance. This study covered the years 2013 to 2017 and used manufacturing companies listed on the Colombo Stock Exchange (CSE). There were 28 companies and 140 observations. Furthermore, firm size is the study's independent variable, capital structure choices are the dependent variable, and corporate governance is the moderating variable. Liquidity, asset tangibility, profitability, and earnings per share are the other four control variables (EPS). To examine the association between firm size and capital structure choices, descriptive statistics, correlation analysis, OLS, and panel regression analysis were used for data analysis, and it was discovered that there is a significant (P<0.01) positive association. Additionally, there is no moderating effect of corporate governance on the relationship between the firm size and capital structure choices of manufacturing companies in Sri Lanka, according to the second goal. These findings are expected to have a significant impact on politics.Key Words: Firm Size, Capital Structure Choice, Corporate Governance