How Firm Characteristics Affect Firm Capital Structure Decision – The Case of Tanzania

This study investigates on how firm characteristics affect firm capital structure decision of non financial firms listed in the Dar es Salaam stock exchange in Tanzania for the year 2005 to 2016. The study uses secondary data collected from Tanzania stock market, the annual financial reports of sampled non financial listed firms due to data availability. The data analysis employs different statistical tools including descriptive statistics, regression analysis and correlation analysis. The results show that firm profitability, size, liquidity and industry type, are significant at 5% level of confidence, having inversely relationship with both dependent variables (firm short term, and total leverage); this means, the more profitable the firms, the low the leverage they employ. Also, the more liquidity the firms, the low the leverage, and also, due to the study area’s economy, many firms use short term loans mainly bank loans; so the smaller the firm the higher the leverage. That means, big firms use bank loans in a nutshell; whereby, tangibility of assets, firm growth and economic condition of the country have found insignificant, that means they have no impact on capital structure decision for non financial listed firms in DSE. In a nutshell, firms use economic conditions as a factor for capital structure decision; whether interest rates and inflation rates are low or high, they use bank loans. Keywords: Leverage, Capital Structure, Firm Characteristics, TanzaniaDOI: 10.7176/JAAS/48-2018-