South Asian Journal of Management

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

Indebtedness in Indian Manufacturing Firms:The Evidence Revisited


Affiliations
1 Finance and Accounting, IILM Graduate School of Management, Greater Noida 201306, India
     

   Subscribe/Renew Journal


This paper analyzes the financing pattern and the determinants of indebtedness of listed standalone Indian manufacturing firms using financial information from 2006-2015. Our findings suggest that stand-alone manufacturing firms rely on banks as a primary source of borrowed capital, and such borrowing is almost always on a secured basis. Our findings also suggest that the distribution of bank credit has got increasingly skewed in favor of large firms. With regard to the determinants of indebtedness, our analysis reveals significant difference in the borrowing behavior of these firms when compared to existing evidence.

Keywords

Debt Ratio, Determinants, Indebtedness, Manufacturing, Panel Regression.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Baltagi, B. H. & Griffin, J. M. (1988). A generalized error component model with heteroschedastic disturbances, International Economic Review, 29(4), 745-753.

  • Bhaduri, S. N. (2002). Determinants of capital structure choice: a study of the Indian corporate sector, Applied Financial Economics, 12, 655-665.

  • Bhole, L. M. & Mahakud, J. (2004). Trends and determinants of capital structure in India: a panel data analysis. Finance India, 18(1), 37–55.

  • Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital structure in developing countries, Journal of Finance, 56(1), 87-130.

  • Chadha, S. & Sharma, A. K. (2015). Determinants of capital structure: an empirical evaluation from India. Journal of Advances in Management Research, 12(1), 3-14. doi.org/10.1108/JAMR-08-2014-0051

  • Chadha, S. & Sharma, A. K. (2016). An empirical study on capital structure in Indian manufacturing sector. Global Business Review, 16(1), 84-95, https://doi.org/10.1177/0972150914553510

  • Chaklader, B. &, Chawla, D. (2016). A study of determinants of capital structure through panel data analysis of firms listed in NSE CNX 500. Vision: The Journal of Business Perspective, 20(4), 267-277.

  • Chakraborty, I. (2011). Does capital structure depend on group affiliation? An analysis of Indian corporate firms, Occasional Paper No. 29, Institute of Development Studies, Kolkata

  • Chen, J. J. (2004). Determinants of capital structure of Chinese-listed companies, Journal of Business Research, 57(12), 1341-1351. https://doi.org/10.1016/S0148-2963(03)00070-5

  • Chen, J., Jiang, C., & Lin, Y. (2014). What determine firms’ capital structure in China?, Managerial Finance, 40(10), 1024-1039, https://doi.org/10.1108/MF-06-2013-0163

  • Demirgrüç-Kunt, A., & Maksimovic, V. (1994). Capital structures in developing countries: evidence from ten countries, World Bank Policy Research Working Paper no. 1320.

  • Ghosh, S. (2007). Bank debt use and firm size: Indian evidence, Small Business Economics, 29, 15-23. DOI 10.1007/s11187-005-2402-0

  • Green, G. J., Murinde, V., & Suppakitjarak, J. (2003). Corporate financial structures in India, South Asian Economic Journal, 4(2), 245-273.

  • Guha-Khasnobis, B., & Bhaduri, S. N. (2002). Determinants of capital structure in India (1990-1998): A dynamic panel data Approach. Journal of Economic Integration, 17(4), 761-776.

  • Handoo, A., & Sharma, K. (2014). A study on the determinants of capital structure in India. IIMB Management Review, 26,170-182.

  • Haron, R. (2016). Do Indonesian firms practice target capital structure? A dynamic approach, Journal of Asia Business Studies, 10(3), 318-334, https://doi.org/10.1108/JABS-07-2015-0100

  • Harris, M. & Raviv, A. (1991). The theory of capital structure, The Journal of Finance, 46(1), 297-355.

  • Hoshi, T., Kashyap, A. & Scharfstein, D. (1990). The role of banks in reducing the costs of financial distress in Japan. Journal of Financial Economics, 27(1), 67-88.

  • Hsiao, C. & Yanun, W. (2006). Panel data analysis – advantages and challenges, Working Paper, 06.49, Insttute of Economic Policy Research, University of Southern California.

  • Khanna, T., & Yafeh, Y. (2007). Business groups in emerging markets: paragons or parasites? , Journal of Economic Literature, 45(2), 331-372.

  • Mahakud, J., & Misra, A. K. (2010). Determination of capital structure in India: a partial adjustment approach. International Journal of Accounting and Finance, 2(2), 220-235.

  • Mahakud, J. (2006). Testing the pecking order theory of capital structure: evidence from Indian corporate sector. ICFAI Journal of Applied Finance, 12(11), 16-26.

  • Manos, R., Green, V., & Murinde, C. J., (2001). Business groups and capital structure: evidence on Indian firms, Finance and Development Research Programme, Working Paper Series, Paper No 34, Institute for Development Policy and Management, University of Manchester.

  • Memon, P. A., Rus, R. B. M., & Ghazali, Z. B. (2015). Firm and Macroeconomic Determinants of Debt: Pakistan Evidence, Procedia - Social and Behavioral Sciences, 172, 200-207, https://doi.org/10.1016/j.sbspro.2015.01.355

  • Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment, The American Economic Review, 48(3), 261-297.

  • Mukherjee, S., & Mahakud, J. (2013). Are trade-off and pecking order theories of capital structure mutually exclusive? Journal of Management Research, 12(1), 41-55.

  • Myers, S. C. (1984). The capital structure puzzle, The Journal of Finance, 39(3), 574-592.

  • Oliveira, G. R., Tabak, B. M., Resende, J. G. L., & Cajueiro, D. O. (2013). Determinants of the level of indebtedness for Brazilian firms: A quantile regression approach, EconomiA, 14(3-4), 123-138, https://doi.org/10.1016/j.econ.2013.11.002

  • Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data, The Journal of Finance, 50(5), 1421-1460.

  • Rodrigues, S. V., Moura, H. J., Santos, D. F. L., & Sobreiro, V. A. (2017). Capital structure management differences in Latin American and US firms after 2008 crisis, Journal of Economics, Finance and Administrative Science, 22(42), 51-74, https:/ /doi.org/10.1108/JEFAS-01-2017-0008

  • Schiantarelli, F., & Sembenelli, A. (2000). Form of ownership and financial constraints: panel data evidence from leverage and investment equations. Empirica, 27(2),175-192.

  • Sharma, P., & Paul, S. (2015). Does Liquidity Determine Capital Structure? Evidence from India. Global Business Review, 16(1), 84-95.

  • Sheikh, N. A., & Wang, Z. (2011). Determinants of capital structure: An empirical study of firms in manufacturing industry of Pakistan, Managerial Finance, 37(2), 117-133, https://doi.org/10.1108/03074351111103668


Abstract Views: 168

PDF Views: 0




  • Indebtedness in Indian Manufacturing Firms:The Evidence Revisited

Abstract Views: 168  |  PDF Views: 0

Authors

Raju Majumdar
Finance and Accounting, IILM Graduate School of Management, Greater Noida 201306, India

Abstract


This paper analyzes the financing pattern and the determinants of indebtedness of listed standalone Indian manufacturing firms using financial information from 2006-2015. Our findings suggest that stand-alone manufacturing firms rely on banks as a primary source of borrowed capital, and such borrowing is almost always on a secured basis. Our findings also suggest that the distribution of bank credit has got increasingly skewed in favor of large firms. With regard to the determinants of indebtedness, our analysis reveals significant difference in the borrowing behavior of these firms when compared to existing evidence.

Keywords


Debt Ratio, Determinants, Indebtedness, Manufacturing, Panel Regression.

References