Impact of Capital Structure on Firm Profitability of Listed Companies in Energy and Utilities Sector on the Stock Exchange of Thailand

Abstract

       The objectives of this study were to examine capital structure, profitability, and the impact of capital structure on firm profitability of listed companies in Energy and Utilities sector on the Stock Exchange of Thailand. Data were collected from the annual financial statement of 42 companies in Energy and Utilities sector listed on the Stock Exchange of Thailand during 2014 - 2018. Total debt to total assets and long-term liabilities to total assets were calculated as proxies for capital structure, while return on total assets and return on equity were used as profitability proxy. Descriptive statistics including Mean and Standard Deviation, Pearson’s correlation coefficient, and Multiple Linear Regression Analysis were employed in the analysis at the statistical significance level of .05

       The findings indicated that capital structure measured by total debt to total assets and long-term liabilities to total assets had an average of 47.82% and 11.82% respectively. The firm profitability ratio, namely return on total assets and return on equity had an average of 7.06% and 9.94% respectively. The capital structure had negative impact on firm profitability at a statistical significance level of .05. If the ratio of total debt to total assets increased by 1%, the return on total assets would decrease by .101%. When the ratio of long-term liabilities to total assets increase by 1%, the return on total assets would decrease by .001%.  Furthermore, company size had statistically positive impact on firm profitability.