Post Recessional Financial Leverage of Car Manufacturing Companies in Emerging Economies, the Story of China and India

Abstract

The burden of companies’ debt may not had been a major cause of the 2007-2008 global recessions but the failure of the financial market alerts companies reliance on external source of financing. Focusing on the pattern of capital structure in emerging economies, this study takes a particular look at how car manufacturing companies in China and India are balancing their debt and equity finance in the post recessional era. Using trend analysis, 5 years data was collect from ten car manufacturing companies in both countries. It was observed that Chinese companies have on average less than 16% debt component as compare with India of more than 20% due to the fact that some Chinese companies receive non interest bearing government grants which is not in India.

Keywords: Capital Structure, Emerging trends, post-recession, debt financing

JEL Classification: G32