EMPIRICAL DETERMINANTS OF CAPITAL STRUCTURE AND ADJUSTMENTS TO LONG – RUN TARGET: EVIDENCE FROM SRI LANKAN PLANTATION COMPANIES

Prior studies in capital structure have focused on the relationship between observed leverage and firm specific and environmental explanatory variables in a static context and this approach has several drawbacks. According to Nankoo and Boateng (2010) capital structure choice has to be examined in a dynamic context. The recent studies have tried to overcome these problems by using dynamic models. No recent evidence can be found on dynamic models applied for Sri Lankan companies. The main objective of this study is to understand the determinants and dynamics of the target capital structure decisions with special reference to Sri Lankan Plantation Companies. The results provide evidence that size of the firms and growth opportunities have a significant negative impact on capital structure choice of these firms. But no proper conclusion can be drawn on the adjustment process towards the target capital structure.Keywords: Capital Structure, Dynamic Structure Model, Capital Structure DeterminantsFor full Paper: fmscresearch@sjp.ac.l