Capital Structure Decisions and Firm Valuation: Evidence from Indian Corporates
Article Sidebar
Main Article Content
Capital structure plays a significant role in determining the financial health, risk profile, and valuation of firms. In the Indian corporate environment, capital structure decisions have gained increasing importance due to economic liberalization, rapid industrial growth, changing regulatory frameworks, and rising participation from domestic and international investors. Capital structure refers to the proportion of debt and equity used by firms to finance their operations and growth activities. The choice between debt and equity financing influences the cost of capital, financial risk, profitability, and shareholder value. Firms with higher debt levels may benefit from tax advantages but are exposed to greater financial risk and bankruptcy possibilities, whereas firms relying more on equity financing may maintain greater financial stability but face higher capital costs and ownership dilution. This study examines the relationship between capital structure and firm valuation among Indian firms by considering various internal and external determinants such as industry characteristics, firm size, ownership structure, market conditions, interest rates, and corporate governance practices. The study aims to identify patterns and insights regarding optimal financing decisions and their impact on firm valuation in the Indian business environment. The findings are expected to provide valuable implications for corporate managers, investors, and policymakers in making effective financial decisions and improving corporate performance.
Downloads
References
Abor, J. (2005). The effect of capital structure on profitability: An empirical analysis of listed firms in Ghana. Journal of Risk Finance, 6(5), 438–445.
Bajaj Finserv. (2023). Annual report 2022–2023. Bajaj Finserv
Brigham, E. F., & Ehrhardt, M. C. (2017). Financial management: Theory & practice (15th ed.). Cengage Learning.
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw-Hill Education.
HCL Technologies. (2023). Annual report 2022–2023. HCL Technologies
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
Kraus, A., & Litzenberger, R. H. (1973). A state-preference model of optimal financial leverage. Journal of Finance, 28(4), 911–922.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48(3), 261–297.
Moneycontrol. (2024). Financial data and market analysis.
Myers, S. C. (1984). The capital structure puzzle. Journal of Finance, 39(3), 575–592.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221.
Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. Journal of Finance, 50(5), 1421–1460.
SEBI. (2023). Annual report 2022–2023.
Sensex. (2024). Annual reports of companies.
Titan Company. (2023). Annual report 2022–2023. Titan Company
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2019). Corporate finance (12th ed.). McGraw-Hill Education.
Gupta, R. (2018). Capital structure and firm valuation: Evidence from Indian companies (Doctoral dissertation, Indian Institute of Management Bangalore).
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles published in our journal are licensed under CC-BY 4.0, which permits authors to retain copyright of their work. This license allows for unrestricted use, sharing, and reproduction of the articles, provided that proper credit is given to the original authors and the source.