Econometric Analysis of the Capital Structure Determinants

Kakani, Ram Kumar; Reddy, V. Nagi

doi:10.2139/ssrn.957087

Cited by 11 publications

(6 citation statements)

References 13 publications

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“…Generally, the capital structure revolves around two main entities: They are (a) debt and (b) equity. Kakani and Reddy (1998) use long-term, short-term, and total debts to total assets in their investigation. Some may argue that if an emerging country such as India has already established the capital structure determinants, those determinants could well be applied to India too; therefore, one may not need to reinvent the wheel and rather consider those determinants.…”

Section: Determinants Of Capital Structurementioning

confidence: 99%

“…Generally, the capital structure revolves around two main entities: They are (a) debt and (b) equity. There have been many combinations proposed in the literature in order to prepare an optimal ratio for a profitable firm; therefore, the literature is quite rich (Chang, Lee, & Lee, 2009;Daskalakis, Balios, & Dalla, 2017;Kakani & Reddy, 1998;Kayo & Kimura, 2011;Titman & Wessels, 1988). Some may argue that if an emerging country such as India has already established the capital structure determinants, those determinants could well be applied to India too; therefore, one may not need to reinvent the wheel and rather consider those determinants.…”

Section: Determinants Of Capital Structurementioning

confidence: 99%

“…Similarly, they use book and market values for their model. Kakani and Reddy (1998) use long-term, short-term, and total debts to total assets in their investigation. They present an empirical study on the determinants of corporate capital structure, and also, they try to develop new theory for large firms in developing countries such as India.…”

Section: Determinants Of Capital Structurementioning

confidence: 99%

See 2 more Smart Citations

Effect of determinants on financial leverage in Indian steel industry: A study on capital structure

Dakua

2018

Int. J Fin Econ

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Because India is neither a developed country nor its steel companies are financially self‐sufficient, they are bound to depend on the external capital, resulting the decision to be taken on the leverage ratio as even more crucial. India being the top exporter of iron ores has the potential to be counted as one of the top exporters of steel if the steel companies follow optimal capital structure. Thus, the leverage ratio needs thorough investigation in order to decide the optimal capital structure. Although there have been some attempts, they are not extensive. The objective of this study is to empirically investigate the present capital structure of Indian steel industry from years 2010 until 2017 and the determinants of capital structure and how these determinants correlate with financial leverage. The research objectives are (1) to identify the significant determinants that affect the capital structure and (2) to conduct an extensive and empirical research in order to estimate the correlations of the determinants with the financial leverage. Seven key determinants have been found: They are profitability, asset structure, size, growth opportunities, non‐debt tax shield, liquidity, and risk. The profitability is found to be highly correlated with the debt ratio as was expected and reported in previous studies. The correlations among the determinants such as asset structure, size, and non‐debt tax shield are statistically significant. Profitability and liquidity carry positive relationship with debt ratio, although there is a negative relationship between debt ratio and asset structure.

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Section: Determinants Of Capital Structurementioning

confidence: 99%

Section: Determinants Of Capital Structurementioning

confidence: 99%

Section: Determinants Of Capital Structurementioning

confidence: 99%

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Effect of determinants on financial leverage in Indian steel industry: A study on capital structure

Dakua

2018

Int. J Fin Econ

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“…Most studies found a negative relationship between profitability and debt financing (Daskalakis & Psillaki, 2008;Kouki & Said, 2012;Myers & Majluf, 1984;Vasiliou, Eriotis, & Daskalakis, 2009). Kakani and Reddy (1996) and Kakani (1999) disclosed profitability, non-debt tax shield and capital intensity as major factors of capital structure. Singh (1995) did a comparison of capital structure of developing countries with that of the developed countries and observed that companies of developing countries financed their capital structure through new equity issues more than the corporations of developed economies.…”

Section: Studies Related To Pecking Order Theorymentioning

confidence: 99%

A Study of Determinants of Capital Structure through Panel Data Analysis of Firms Listed in NSE CNX 500

Chaklader

Chawla

2016

Vision: The Journal of Business Perspective

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This study contributes to the capital structure literature by investigating the determinants of capital structure of firms listed in NSE CNX 500. The period of the study is 2008–2015, the period starting from the year of global slowdown. This study is an attempt to study the capital structure of firms listed in National Stock Exchange in the post liberalization period. The objectives of the study are to study the impact of independent variables such as growth, profitability, tangibility, liquidity, size and non-debt tax shield on financial leverage and also to find out whether the results are in line with the pecking order theory or the trade-off theory of capital structure. Size is taken as a control variable. Our study supports the trade-off theory for all variables such as growth, profitability, size tangibility and non-debt tax shield. Liquidity is the only independent variable that goes in accordance with the pecking order theory. Thus, this study is more inclined towards the trade-off theory.

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“…Different researchers have studied the capital structure decision from different point of views and in different environments related to developed and developing economies; a few of them are cited here. The studies by Kakani and Reddy (1996) and Kakani (1999) revealed profitability, capital intensity and non-debt tax shields were important determinants of capital structure. The study by Cassar and Holmes (2003) showed that the asset structure, profitability and growth were important factors which affected the debt equity ratio of firms.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Capital Structure : Evidence from Oman

Kumar¹,

Mansour²

2013

AJBMR

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Capital structure decisions have important implications on the value of the firm, as the components of the capital determine the cost of capital. The guiding principle is to choose the capital structure that maximizes the value of the firm. The objective of this study is to find out the determinants of capital structure of Oman corporate. This study is based on the financial data collected from the balance sheets and income statements of all companies listed in the Muscat Securities Market excluding banks, financial institutions and insurance companies. The sample includes 82 firms. The period of study is six years from 2006 to 2011. This study implies that in the context of lower profitability of firms, the firms tend to use more leverage as a means of sourcing finance. The study also finds that the decision to increase leverage is a function of efficiency of utilization of assets. Higher the efficiency in asset turnovers more is the tendency to use leverage. Another implication of the study is that leverage is a function of size. Companies which increase their revenues tend to be become debt intensive.

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Econometric Analysis of the Capital Structure Determinants

Cited by 11 publications

References 13 publications

Effect of determinants on financial leverage in Indian steel industry: A study on capital structure

Effect of determinants on financial leverage in Indian steel industry: A study on capital structure

A Study of Determinants of Capital Structure through Panel Data Analysis of Firms Listed in NSE CNX 500

Determinants of Capital Structure : Evidence from Oman

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