Article-1 Influence of Funding Mix on the Profitability of Pharmaceutical Companies Listed in the Dhaka Stock Exchange

Abstract

The ultimate resolution of this study is to scrutinize the influence of the funding mix on firm profitability while attempting to discover an optimum capital structure for the corporations listed in the pharmaceutical segment of the Dhaka Stock Exchange. For this reason, the investigation has been performed on 19 registered companies in the pharmaceuticals and chemicals industry of the Dhaka Stock Exchange (DSE). Only pharmaceutical firms from the pharmaceuticals and chemical sector have been filtered for the time period of 2012 to 2021 in order to make the research more pertinent to the industry and timeframe. The research has espoused Return on Assets (ROA) and Return on Equity (ROE) as indicants of profitability. The independent variables of the study are Debt to Equity Ratio (DER), Interest Coverage Ratio (ICR), Short Term Debt to Asset ratio (STDAR), Long Term Debt to Asset ratio (LTDAR) and Total Debt to Total Asset Ratio (TDTAs). As for the control variable, Firm Size (LnTA) and Age have been used. This paper has employed the pooled ordinary least square regression technique in the breakdown of the firm performance owing to changes in the funding mix. The outcomes demonstrate that the Debt-to-Equity Ratio (DER) has a noteworthy negative relation with ROA and ROE. Short-term debt to Asset (STDAR) and Long-term debt to the asset (LTDAR) have a significant positive bearing on ROA. Log of Total Assets (LnTA) which is an index of firm size has a significant positive impact on ROA and ROE. The study recommends that firms should incorporate debt in their capital formation when the anticipated return is more than the cost of debt while not only considering the tax benefits.