EMPIRICAL ANALYSIS OF DETERMINANTS OF CAPITAL STRUCTURE IN SELECTED SECTORS

Ruchi Malhotra, Dr. B.S. Bhatia, Dr. Pooja Arora

Abstract


Financial upliftment of company’s decision depends on important determinants of capital structure of selected companies of six different sectors under taken. Selection of these companies was done on the basis of S&P BSE 500 index. Wrong decision can lead to financial distress and bankruptcy. To improve profit maximization, financial managers need to allocate optimum capital structure. As known, Indian companies have shown tremendous transformation in various sectors to sustain growth and further GDP’s. The objective of this paper was to examine vital determinants of capital structure decisions of selected sectors (banking, textile, pharmaceutical, computer and software, power generation and distribution and FMCG). Each sector was evaluated on criteria of data linked to past 13 years for 203 companies. The empirical study investigates the determinants of capital structure to attain optimum capital structure in India from 2001-13. The empirical results justified the validity of hypothesis. Debt equity ratio or leverage as dependent variables and LIQUIDITY, DIVIDEND PAYOUT RATIO , TAX SHILD, PROFITABLITY, SIZE, TANGIBILITY and  GROWTH RATE as potential predictors and their relationship analyzed by econometric techniques.


Keywords


Selected Sectors; Capital Structure; Indian Companies

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References


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