The paper is set on the theoretical backdrop of the importance and exigency of
capital structure in firms’ pursuits to maximize shareholders’ wealth. The study
investigates the different capital structure strategies adopted by Botswana
firms. In its methodology, the study adopted an approach used by Graham and
Harvey [1] in developing the research instrument. The study methodology used
is premised on the presupposition that issues of capital structure are more
pronounced with the increase in firm size, with the largest firms generally
being those listed on the stock exchange. Primary data was collected from a
small sample of firms listed on the Botswana Stock Exchange (BSE), in keeping
with the exploratory nature of the study. The results were indicative of lack of
theoretical considerations in the adoption and application of capital structure
strategies by management across the listed firms. While most firms preferred
using external equity as a financing option, followed by retained earnings, debt
was found to be the least preferred financing option. Also found was that
management was generally knowledgeable of the benefits associated with debt
financing, and in particular the tax-deductibility of the cost of debt and
reduction of agency costs. Overall, the findings were puzzling when juxtaposed
with the theoretical perspectives of the trade-off theory, the pecking order
theory and agency costs theory. The study concludes by suggesting further
research to uncover the extent to which these preliminary results are
applicable and uncovering the underlying rationality.

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