International Journal of Financial Management

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An Empirical Study on Effect of Capital Structure on Financial Performance of Paper Manufacturing Companies in India: Penal Data Analysis


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1 Department of Commerce, M.K. Bhavnagar University, Bhavnagar, Gujarat, India
     

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In this research paper, the researcher has attempted to study the effect of capital structure on the financial performance of selected paper manufacturing firms in India. Secondary data have been used. The study period was of five years from 20014-2015 to 2018-2019. Accounting ratio and statistical tools like descriptive statistics, correlation matrix, and penal data analysis have been used. The result of the descriptive statistics shows that ROA, ROCE, EPS and valuation indicate good financial performance. While the debt-equity ratio shows debt is more than equity in the capital structure. The researcher identified four financial indicators, namely ROA, ROCE, EPS and Valuation. The researcher has also identified debt-equity ratio, long term debt-equity ratio, a log of debt, firm size and interest coverage ratio as dependent variables. Model-1 indicates that ROS is significantly affected by the interest coverage ratio, wherein fixed-effect model ROA is also affected by the interest coverage ratio. Model-2 shows that there is a significant effect of debt-equity ratio long term debt-equity ratio and interest coverage ratio on RCOE. The fixed-effect model shows that only firm size and interest coverage have a significant effect on ROCE. Model-3 shows that the debt-equity ratio, long term debt-equity ratio, firm size, a log of debt and interest coverage ratio is insignificant to EPS. Wherein firm size is significant to EPS in fixed effect mode. Another variable like the debt-equity ratio, long term debt-equity ratio, a log of debt and interest coverage ratio is insignificant to EPS. Model-4 indicates that firm size is significant to the valuation. The fixed-effect model shows that all independent variables are insignificant to valuation.

Keywords

Capital Structure, Financial Performance and Cement Companies.
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  • An Empirical Study on Effect of Capital Structure on Financial Performance of Paper Manufacturing Companies in India: Penal Data Analysis

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Authors

Butalal Ajmera
Department of Commerce, M.K. Bhavnagar University, Bhavnagar, Gujarat, India

Abstract


In this research paper, the researcher has attempted to study the effect of capital structure on the financial performance of selected paper manufacturing firms in India. Secondary data have been used. The study period was of five years from 20014-2015 to 2018-2019. Accounting ratio and statistical tools like descriptive statistics, correlation matrix, and penal data analysis have been used. The result of the descriptive statistics shows that ROA, ROCE, EPS and valuation indicate good financial performance. While the debt-equity ratio shows debt is more than equity in the capital structure. The researcher identified four financial indicators, namely ROA, ROCE, EPS and Valuation. The researcher has also identified debt-equity ratio, long term debt-equity ratio, a log of debt, firm size and interest coverage ratio as dependent variables. Model-1 indicates that ROS is significantly affected by the interest coverage ratio, wherein fixed-effect model ROA is also affected by the interest coverage ratio. Model-2 shows that there is a significant effect of debt-equity ratio long term debt-equity ratio and interest coverage ratio on RCOE. The fixed-effect model shows that only firm size and interest coverage have a significant effect on ROCE. Model-3 shows that the debt-equity ratio, long term debt-equity ratio, firm size, a log of debt and interest coverage ratio is insignificant to EPS. Wherein firm size is significant to EPS in fixed effect mode. Another variable like the debt-equity ratio, long term debt-equity ratio, a log of debt and interest coverage ratio is insignificant to EPS. Model-4 indicates that firm size is significant to the valuation. The fixed-effect model shows that all independent variables are insignificant to valuation.

Keywords


Capital Structure, Financial Performance and Cement Companies.

References