Abstract:
1. Introduction
The limited focus on intangible assets in capital structure decisions
highlights a gap, particularly when compared to traditional factors such as
profitability or tangible assets. This study addresses this gap by examining
how goodwill influences the capital structure of firms in Sri Lanka's Food,
Beverage, and Tobacco industries while also investigating how interest
rates moderate this relationship.
2. Research Methodology
This study employs a quantitative approach, utilizing secondary data from
43 listed companies in the Food, Beverage, and Tobacco industry in Sri
Lanka. The sample period spans from 2013 to 2022. Sampling was
conducted using a purposive technique. The variables include total debt to
total assets (dependent variable), goodwill (independent variable), and
interest rate (moderating variable), alongside six control variables: firm
size, market-to-book ratio, tangible assets, profitability, depreciation, and
firm age. A two-step Generalized Method of Moments (GMM) model was
employed to address endogeneity and persistence in the debt structure,
ensuring robust and reliable findings.
3. Findings and Discussion
The findings reveal a significant positive relationship between goodwill
and capital structure, suggesting that goodwill enhances access to debt
financing. However, rising interest rates weaken this positive relationship,
indicating that firms are less inclined to rely on debt backed by goodwill
under high-interest conditions. The results align with prior studies on
goodwill as collateral with the moderating role of interest rates in the Sri
Lankan context.
4. Conclusion and Implications
This research contributes to the literature by highlighting the importance
of goodwill in capital structure decisions and offers practical implications
for financial managers to optimize financing strategies
