Capital structure is one of the important corporate
finance decisions. Trade off theory suggests the existence of optimal capital
structure at which firm value is maximized. But the optimal capital structure
varies with a number of firm characteristics and its business environment.
Hence, understanding the determinants of capital structure is important.
Researchers have identified number of determinants of capital structure,
however the relationship of these determinants with capital structure is found
to be varied. It is also evident that companies operating in different
economies generally have different capital structure. Hence it is worth
exploring the determinants of capital structure for companies operating in a
particular economy. Bangladesh is an emerging economy characterized by high GDP
growth, rapid infrastructural development, evolving banking sector and capital
market growth. In this context, a review of the determinants of capital
structure of Bangladeshi companies is worth exploring. This research therefore
does a systematic review of the literature on the determinants of capital
structure of the companies in Bangladesh. The objective is to summarize the
findings of the empirical researches, analyze the findings in light of the
existing theories of capital structure, and compare the findings with those of
other emerging and developed economies. The findings of the study will be of
significant use for practitioners in determining and justifying appropriate
capital structure of their companies. The analysis done in this paper also
proposes modification of the existing capital structure theories as such to add
several macro factors into account. Future researchers may use the findings of
this paper as the base line to identify the focus of further research.