Asian Journal of Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Determinants of Capital Structure:A Study of Indian FMCG Sector


Affiliations
1 DAV Institute of Engineering and Technology, Kabir Nagar, Jalandhar 144008, India
     

   Subscribe/Renew Journal


Financing decisions or capital structure decisions are one of the most important decisions which a firm has to take. There have been a lot of studies on this and there is no consensus about the meaning of an optimum capital structure. In this study an attempt has been made to identify the factors affecting the capital structure decisions of the firms in FMCG Sector in India. The study has been conducted on 15 leading FMCG companies operating in India. All these companies are listed on the Bombay Stock Exchange and are a part of S and P BSE Fast Moving Consumer Goods Index. The study covers a period of 5 years i.e. 2011-12 to 2015-16. For the study, one dependent variable i.e. Debt Equity Ratio and seven independent variables i.e. profitability, tangibility, liquidity, size, business risk, non-debt tax shield and coverage ratio have been used. The correlation and multiple regressions have been used to find out the factors affecting the capital structure of the firms. Out of the seven independent factors, only two factors i.e. liquidity and profitability have been found to be significantly affecting the capital structure.

Keywords

Capital Structure, Liquidity, Profitability, Business Risk, FMCG, NDTS.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Modigliani, F and Miller, M. H. (1958). The Cost of Capital, Corporate Finance and the Theory of Investment, American Economic Review, 48, 261-297.

  • Modigliani, F and Miller, M. H (1963),”Corporate income tax and the cost of capital: a correction”, American economic review,53:433-442.

  • Titman, S. and Wessels, R. (1988),”The determinants of capital structure choice”, The Journal of Finance, XLIII(1):1-19.

  • Harris, M., and Raviv, A., (1991).The theory of capital structure. Journal of Finance.46, 297-355

  • Anand, Dr. Manoj. (2002) ‘Corporate finance practices in India: A Survey’, Vikalpa, October- December, Vol.27, No.4, pp.29-56.

  • Anand, Dr. Manoj. (2002) ‘A Review of Research on Practices of corporate finance’, South Asian Journal of Management, July – September

  • Das. S. and Roy. M, 2003. Inter Industry Differences in Capital Structure: The Evidence from India. Department of Economics, Jadavpur University

  • Baral, K. J. (2004). Determinants of Capital Structure: A Case Study of Listed Companies of Nepal. Journal of Nepalese Business Studies

  • Kirti Madan 2007, ‘An analysis of the debt-equity structures of leading hotel chains in India’, International Journal of Contemporary Hospitality Management, vol.19 no.5, pp.397-414.

  • Pathak, Joy, What Determines Capital Structure of Listed Firms in India?: Some Empirical Evidencesfrom The Indian Capital Market (April 21, 2010). Available at SSRN:http://ssrn.com/abstract=1561145 or http://dx.doi.org/10.2139/ssrn.1561145

  • Mishra, C. S. (2011). Determinants of Capital Structure- A Study of Manufacturing Sector PSUs in India, International Conference of Financial Management and Economics, 11.

  • Riyazahmed (2012), “Determinants of capital structure: A case of automobile manufacturing companies listed in NSE”, international journal of marketing, financial services and management research, Vol.No.4, pp 47-52

  • Anurag Pahuja and Anu Sahi (2012) ‘Factors Affecting Capital Structure Decisions: Empirical Evident from Selected Indian Firms’, International Journal of Marketing, Financial Services and Management Research, Vol.1, No. 3, March 2012, pp 76-86

  • Kaushik Basu and Meenakshi Rajeev (2013), ‘Determinants of Capital Structure of Indian Corporate sector: Evidence Of Regulatory Impact’, Working Paper 306, Centre for Economic Studies and Policy (CESP), Institute for Social and Economic Change (ISEC), Nagarbhavi, Bangalore-560072, Karnataka, India.

  • Yadav Chette Srinivas (2014) ‘Determinants of Capital Structure and Financial Leverage: Evidence of Selected Indian Companies’, Asia Pacific Journal of Research, Vol. 1, Issue XII

  • Neha Poddar and Manish Mittal (2014), ‘Capital Structure Determinants of Steel Companies in India: A Panel Data Analysis’, GALAXY International Interdisciplinary Research Journal, Vol.2, No.1, pp 144-158.

  • Md. Imran Hossain and Md. Akram Hossain (2015), ‘Determinants of Capital Structure and Testing of Theories: A Study on the listed Manufacturing Companies in Bangladesh’, International Journal of Economics and Finance, Vol. 7, No. 4, 2015, pp 176-190.

  • S. Sathyanarayana, S. N. Harish and Hemanth Kumar (2017), ‘Determinants of Capital Structure: Evidence from Indian Stock Market with Special Reference to Capital Goods, FMCG, Infrastructure and IT sector’, SDMIMD Journal of Management, Vol.8, No.1, pp 55-73.

  • Pandey I M, Essentials of Financial Management (4th Edition), Vikas Publishing House Pvt. Ltd.

  • www.moneycontrol.com

  • www.bseindia.com

  • www.nse-india.com


Abstract Views: 544

PDF Views: 0




  • Determinants of Capital Structure:A Study of Indian FMCG Sector

Abstract Views: 544  |  PDF Views: 0

Authors

Anil Soni
DAV Institute of Engineering and Technology, Kabir Nagar, Jalandhar 144008, India

Abstract


Financing decisions or capital structure decisions are one of the most important decisions which a firm has to take. There have been a lot of studies on this and there is no consensus about the meaning of an optimum capital structure. In this study an attempt has been made to identify the factors affecting the capital structure decisions of the firms in FMCG Sector in India. The study has been conducted on 15 leading FMCG companies operating in India. All these companies are listed on the Bombay Stock Exchange and are a part of S and P BSE Fast Moving Consumer Goods Index. The study covers a period of 5 years i.e. 2011-12 to 2015-16. For the study, one dependent variable i.e. Debt Equity Ratio and seven independent variables i.e. profitability, tangibility, liquidity, size, business risk, non-debt tax shield and coverage ratio have been used. The correlation and multiple regressions have been used to find out the factors affecting the capital structure of the firms. Out of the seven independent factors, only two factors i.e. liquidity and profitability have been found to be significantly affecting the capital structure.

Keywords


Capital Structure, Liquidity, Profitability, Business Risk, FMCG, NDTS.

References