Impact of Capital Structure on the Firm Value : Case Study of Listed Manufacturing Companies in Sri Lanka

Capital structure is one of the most complex areas of financial decision making because of its interrelationship with other financial decision variables. Capital structure choice is an important decision for a firm. It is important not only from returns maximization point of view, but also because this decision has a great impact on a firm's ability to successfully operating competitive environment. In this study, an attempt has been made to analyze the Capital Structure and Firm Value during 2008 to 2012 (05 years) financial year of listed manufacturing companies in Sri Lanka. For the purpose of this study, the data was extracted from the annual reports of sample companies. Correlation and multiple regression analysis are used for analysis with the STATA 12 versions. The results revealed that Capital Structure has an impact on firm value ratio. Further Equity Ratio is negatively correlated with EPS, which are significant 5 and 1 percent level of significance respectively