Can Capital Structure Influence the Performance of the Firm? Evidence from India

The Empirical Economics Letters, 17(11): (November 2018) ISSN 1681 8997

11 Pages Posted: 16 Apr 2019

See all articles by Dr. Sasikanta Tripathy

Dr. Sasikanta Tripathy

Indian Institute of Technology Kharagpur; SRM University AP, Amaravati; NIT Jamshedpur

Shailender Singh

Independent

Date Written: November 1, 2018

Abstract

In this study, the association between financial performance and capital structure of 56 BSE listed firms is investigated over the period 2000-2017. Here fully modified OLS (FMOLS) and generalized method of moments (GMM) have been applied as two alternative methods of panel data estimation. Results indicate that capital structure is significantly and positively associated with firm performance. Results thus obtained are robust across the estimation methods. The pecking order theory and the static trade-off theory, both seem to explain Indian firms' decisions among the three alternative theories of capital structure. This paper also supports to the agency cost theory.

Keywords: capital structure, firm performance, FMOLS, GMM

JEL Classification: D24, G31, C23, C31

Suggested Citation

Tripathy, Dr. Sasikanta and Tripathy, Dr. Sasikanta and Singh, Shailender, Can Capital Structure Influence the Performance of the Firm? Evidence from India (November 1, 2018). The Empirical Economics Letters, 17(11): (November 2018) ISSN 1681 8997, Available at SSRN: https://ssrn.com/abstract=3358083

Dr. Sasikanta Tripathy (Contact Author)

Indian Institute of Technology Kharagpur ( email )

Kharagpur
IIT Khragpur
IN
India

SRM University AP, Amaravati ( email )

Neerukonda
Mangalagiri
Guntur, IN 522502
India
9337026846 (Phone)

NIT Jamshedpur ( email )

Jamshedpur, IN Jharkhand 831014
India
7488186533 (Phone)

Shailender Singh

Independent

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
119
Abstract Views
443
Rank
349,550
PlumX Metrics