Impact of capital structure on profitability: An empirical analysis of listed manufacturing companies in sri lanka

This study investigates capital structure and profitability of manufacturing companies listed on Colombo stock exchange, Sri Lanka, in order to find out the degree of impact of capital structure on profitability of listed manufacturing firms in Sri Lanka. Researcher choose manufacturing sector listed companies as a sample, because the sector has grown faster and number of companies also more than any other sector in Sri Lankan economy. Further, the contribution of the manufacturing sector to total Gross Domestic Product (GDP) also higher and compare with other companies manufacturing industry is the important one in the country’s economic development. Researcher selected 33 listed manufacturing companies in Colombo stock exchange as a sample and carry out the research work for ten years from 2007 to 2016. Findings of this study are, debt to equity and debt to assets have a positive not significant regression coefficient on gross profit and debt to assets has a negative significant regression coefficient on net profit, return on assets, return on equity, and return on capital employee. This is match with the past empirical analysis in developing countries as well as Sri Lanka. This negative relationship suggests that high debt financing is leads to less return by more interest expenses.