Capital Structure Determinants of Indian companies

This paper identifies the most determinant of capital structure of listed Indian firms comprising both private and public sector. It has been concluded that factors such as profitability, growth, asset tangibility, size, cost of debt, tax rate and debt serving capacity have significant impact on leverage structure chosen by firms in Indian context. This paper analyse the relationship the firm’s capital structure and its information acquisition prior to capital budgeting decisions. In these industries leverage is negatively related to firm’s incentive to acquire information during the capital budgeting process. The paper identifies the pattern of sources of funds for Indian corporate.The main focus of the paper is on the financing decisions of the firms and to investigate whether these issuance decisions are consistent with market timing behaviour or traditional theories notably trade-off and pecking order theories. The study also gives more importance to the effects of two major factors market performance and profitability of the firms in determining the type of finance that they issue. In order to increase the scope of drawing inference and differentiating between the theories of capital structures the dual issuers are included in the study as a separate issue type.