Authors: Md Juman Hussan
Abstract: Debt financing raises a firm's fixed payment obligations, and with them, financial risk. This paper tests how finance managers in Bangladesh perceive that trade-off, and whether they connect it to two market-facing outcomes: sales revenue and share price. Fifty finance managers from six industry groups completed a structured, five-point Likert questionnaire. A one-sample Z-test, run at the 95 per cent confidence level, rejects the null hypothesis for all three relationships tested. Ninety-four per cent of respondents agreed that leverage raises financial risk (Z = -6.20). All fifty respondents agreed that leverage raises sales revenue (Z = -7.04). Eighty-four per cent agreed that return moves together with share price (Z = -4.79). Ninety-two per cent of firms in the sample pay 16 to 20 per cent interest on their debt capital, which helps explain why risk perception runs high. The paper argues that Bangladeshi finance managers hold a risk-return view of leverage that lines up with core capital structure theory, despite operating in a market with thin bond markets and high borrowing costs.
