Firm Specific Factors of Corporate Capital Structure:An Empirical Study with Reference to Select Indian Companies

Authors

  • Tapas Kr. Sarkar
  • Debdas Rakshit

DOI:

https://doi.org/10.33516/rb.v42i2.58-70p

Keywords:

Trade-Off Theory, Pecking Order Theory, Agency Cost Theory, Capital Structure Determinants, Panel Data.

Abstract

The purpose of this study is to identify the most significant factors in determining the capital structure of the selected companies in India and acceptability of these factors in the light of the propositions formulated by the three important capital structure theories, namely, the pecking order, the trade-off and the agency cost theory. According to the objectives of the study, eighty non-financial firms from a heterogeneous set of Indian industries are selected on the basis of highest turnover and availability of 12 years balance panel data set running from 2000-01 to 2011-12. Along with leverage as dependent variable, eight independent variables, namely, profitability, size, growth, tangibility, non-debt tax shield, income variation, liquidity and uniqueness are used to analyze their influences and explaining power on leverage. Finally, panel data random effect model is selected as an appropriate specification to analyze the regression equation. Finding of the study reveals that profitability, size, growth, tangibility, liquidity and uniqueness are found to have significant influence on the leverage of the selected firms in India. The current study also reveals that most of the factors are mainly in line with the pecking order theory and there is a small evidence to support either the trade-off theory or the agency cost theory.

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Published

2016-07-01

How to Cite

Sarkar, T. K., & Rakshit, D. (2016). Firm Specific Factors of Corporate Capital Structure:An Empirical Study with Reference to Select Indian Companies. Research Bulletin, 42(2), 58–70. https://doi.org/10.33516/rb.v42i2.58-70p

Issue

Volume 42, Issue 2, July 2016

Section

Articles
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