Impact of Macroeconomic Factors on Capital Structure choice of Indian Firms

Registration ID: IJNRD_202909

Published ID: IJNRD2308027

DOI: Click Here to Get

Harsh Sharma

Capital structure, Leverage, Interest rate, GDP, Indian firms, Panel Data, Random Effects Model

Several studies have been conducted to explore the factors affecting choice of capital structure, i.e., split between debt and equity, of firms. Most of these studies have focused on firm specific factors. Recently, studies have been conducted to determine the influence of macroeconomic variables on this decision of firms, but they are still in the nascent stage. Moreover, most of these studies have been confined to developed countries, with different business environments, so their results may or may not be applicable in the Indian context. In this paper, influence of macroeconomic variables, like inflation, GDP growth rate, interest rates, and net FDI, on the capital structure of Indian firms has been empirically examined. Some firm-specific variables—return on equity and asset tangibility—have also been used to improve fit of the model. Panel data regression analysis has been conducted on the data of 65 NSE 100 companies, over the past 20 years. Inflation and net FDI flows, as a percentage of GDP, were found to be negatively related with leverage of firms, while GDP growth was found to have an insignificant relationship with the same. With respect to firm specific factors, both, return on equity and asset tangibility, were found to be positively related to leverage of firms.

Published Paper   E-Certificate

Harsh Sharma (August-2023). Impact of Macroeconomic Factors on Capital Structure choice of Indian Firms. INTERNATIONAL JOURNAL OF NOVEL RESEARCH AND DEVELOPMENT, 8(8), a227-a237. https://ijnrd.org/papers/IJNRD2308027.pdf

Volume 8 Issue 8, August-2023

Pages : a227-a237

Paper Reg. ID: IJNRD_202909

Published Paper Id: IJNRD2308027

Downloads: 000121990

Research Area: Science

Country: Ahmedabad, Gujarat, India

Published Paper PDF: https://ijnrd.org/papers/IJNRD2308027.pdf

Published Paper URL: https://ijnrd.org/viewpaperforall?paper=IJNRD2308027

Journal Name: INTERNATIONAL JOURNAL OF NOVEL RESEARCH AND DEVELOPMENT(IJNRD)

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