Volume : III, Issue : VII, July - 2014

Determinants of Capital Structure: Emprical Evidence from India

Dr . R. Kavitha

Abstract :

Capital structure is fundamentally permanent long term financing of a firm. Although there has been abundance of research focusing on the most important determinants of capital structure, there is still deviation regarding which factors significantly affect a firms capital structure. This study examines the determinants of capital structure in Indian large pharmaceutical companies for the period of 10 years from 2002–03 to 2011–12. Statistical measures average, standard deviation; maximum, minimum, range, multiple correlations and multiple regressions have been used for the analysis of collected data. Out of eight examined explanatory variables–size, business risk, earning rate, liquidity, tangibility, debt service capacity, non–debt tax shield and degree of operating leverage, four– size, earning rate, tangibility and debt service capacity –are statistically significant determinants of financial leverage. Beta coefficients associated with corporate size, earning rate, tangibility and debt service capacity are statistically significant at 1% and 5% level. These factors play a major role in the determination of the financial leverage in pharmaceutical companies and business risk, liquidity, non–debt–tax shield and degree of operating leverage do a dismal role. It is recommended that policy makers should focus on these determinants when making any decisions regarding capital structure.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Dr .R.Kavitha Determinants of Capital Structure: Emprical Evidence from India Indian Journal of Applied Research, Vol.4, Issue.7 July 2014

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