DETERMINANT OF CAPITAL STRUCTURE OF NEPALESE HYDROPOWER COMPANIES

Abstract

This study investigates the determinants of capital structure in five major Nepalese hydropower companies over a ten year period (2070/71 to 2079/80). The research employs descriptive and causal comparative designs, analyzing secondary data from annual reports and other financial documents. Key variables examined include Return on Assets (ROA), Bank Size, Assets Growth Rate, and Return on Eq uity (ROE), with Total Debt to Assets (TDA) and Total Debt to Equity (TDE) as the dependent variables. The findings reveal that Bank Size is a significant determinant of capital structure, with larger companies exhibiting higher debt ratios. Profitability measures, conversely, show an inverse relationship with leverage, indicating that more profitable companies tend to rely less on debt. The analysis of individual companies highlights diverse financial strategies and performance profiles within the sector. While some companies, like Butwal Power Company Limited (BPCL) and Sanima Mai Hydropower Limited (SHPC), demonstrated a trend toward reducing debt, others, such as Upper Tamakoshi Hydropower Ltd (UPPER), faced profitability challenges despite substantial a sset growth. Regression models underscore the significance of Bank Size, ROE, and ROA in determining capital structure, with Bank Size emerging as the most influential factor. The study's findings have important implications for financial management, regul atory policies, and investor decisions in the Nepalese hydropower sector. Financial managers are advised to monitor debt levels carefully, particularly in larger firms, and focus on profitability to reduce reliance on debt financing. Regulatory bodies may need to consider sector specific guidelines to encourage balanced capital structures. Overall, this research contributes valuable insights into the financial strategies and risks associated with capital structure decisions in Nepal's hydropower industry, p roviding a foundation for future research and development.