IMPACT OF VALUE OF THE COMPANY DUE TO THE CHANGES IN DEBT–EQUITY MIX (SELECTED COMPANY)

N.Nadanamoorthy; S.Dhachanamoorthy

Volume : IV, Issue : XII, December - 2015

IMPACT OF VALUE OF THE COMPANY DUE TO THE CHANGES IN DEBT–EQUITY MIX (SELECTED COMPANY)

N. Nadanamoorthy, S. Dhachanamoorthy

Abstract :

The choice of debt and equity in financing the assets of corporate firms assumes vital significance in corporate financial management due to their influence both on return and risk of the shareholders. Corporate enterprises generally are inclined to use more debt in financing their assets. The major reasons are: (i) debt is a cheaper source of finance in view of tax advantage on interest payments, (ii) it does not lead to the problem of dilution of control from its existing owners and (iii) it magnifies the rate of return to its equity–holders. However, the corporate managers are to guard themselves against the excessive use of debt as it may endanger the very survival of the corporate firms. The primary objective of the study is to enumerate the capital structure practices followed by the private corporate enterprises in India during 2010–15. Besides, the study also aims at comp� the capital structure practices of foreign controlled companies in India with the domestic companies. The study, inter–alia, examines the constituents of debt, risk characteristics of the corporate firms, the existence of pecking order hypothesis ( firms follow a preferred hierarchy in raising funds, internal to external; if external, debt to equity) in India and some of the major design parameters of capital structure. The present endeavour also seeks corporate finance managers‘ opinion on factors affecting capital structure decisions and the changes,if any, in the wake of globalisation in India.