A.P.N. Raja Bandara1, G.Sujenthirai2 , W.A.R Senevirathne3
123Department of Accounting and Finance, Faculty of Management Studies
The Open University of Sri Lanka.
firstname.lastname@example.org ,2Sujiraj391@gmail.com, email@example.com
One of Sri Lanka’s top industries for earning foreign currency is clothing and textiles. However, the Covid19 pandemic adversely hampered the performance of the textile sector and seriously affected the company’s economic operations. To continue in business Whatever the state of affairs are in the nation and the world, capitalizing is a must. There are primarily two forms of funding the business for that. Those are debt and equity financing. Accordingly,the study’s primary objective is to investigate the effects of capital structure on business performance during the Covid-19 pandemic of small and medium scale enterprises in Sri Lanka’s apparel and textile industry. The study was a quantitative research study, employed a survey research strategy. A structured questionnaire was administered to collect primary data from responses and data was analyzed through statistical software SPSS 23.0. Sample size consists of 154 SMEs in apparel and textile industry in western province in Sri Lanka and sampling technique was stratified sampling technique. Employing Pearson’s correlation analysis and multiple linear regression analysis, the conceptual framework was evaluated. The empirical findings from the use of multiple linear regression analysis showed that debt financing had a significant and positive influence on business performance whereas equity financing had a significant and negative influence on firm performance. The goodness of fitness of the overall model presented 55%. Out of nine hypotheses, three hypotheses were rejected through regression analysis. Borrowings, Other payables, Owner’s intangible assets were not significantly influenced on firm performance.Trade payables, contractual obligations, owners’ cash on hand, and owners’ physical assets all had a substantial impact on the operating activities of the garment and textile business during the Covid-19 outbreak.Based on the findings of the study, it was concluded that, SMEs in the apparel and textile industry employed both short-term debt and equity (retained earnings) to finance the operating activities of the firm during the Covid-19 pandemic and debt financing and equity financing significantly impacted on firm performance of the company.
Keywords: Debt, Equity, Covid-19, Apparel industry, Performance