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SFM Cia 1.2
SFM Cia 1.2
SFM Cia 1.2
(Majumdar & Chhibber, 1999) has investigated the relationship between leverage, or the level
of debt in the capital structure, and performance for a large cross-section of Indian firms. The
Indian economy is in the throes of a major economic transition since 1991, and India is in the
news as a location of contemporary economic consequence yet, extremely little factual evidence
about the behaviour and performance of Indian firms exists in the literature. This paper attempts
to fill the gap that exists between interest and evidence by exploring a narrow governance issue.
Study obtained extensive firm level data from the Centre for Monitoring the Indian Economy and
supplemented by Bombay Stock Exchange data, containing information for over 1000 Indian
firms with the guidance of the department of statistical analysis and Computer services of the
RBI for the empirical analysis. The data are cross-sectional for each firm and are collected for
one of the years between 1988 and 1994, depending on the availability of all key variables for
that year, Based on studies of literature reviews no of control variables like Debt equity, Size,
Age, Diversity, Group, Foreign, Exports, Advertising, Distribution, Marketing, Capital intensity,
Inventory, Liquidity, Sales growth, Excise, Imports and Times (industry related factors) are
introduced to assess the impact that leverage has on corporate performance in the Indian context,
Debt equity was used as the principal explanatory variable in a model where the dependent
variable is profitability. Industry variables have indexed on the values between 0 and 5 for the
evolution. Study obtained regression results using weighted least squares estimation. Results of
the study showed the significance and sign of the relationship of industry related factors with the
performance of the firm. Findings of the study shown a negative relationship which is not in
accordance with the assumptions of theory as commonly-accepted in Western economies and
author stated that In India, suppliers of debt are government-owned financial institutions, and the
postulates of agency theory, as applied to contemporary corporate governance issues in the West,
have to be re-assessed in light of state-ownership of financial institutions. For further study firms
in other developed countries like US, UK and Canada, etc. can be considered and instead of
considering all the firms, performance of firms related to separate/individual industries can be
analysed and compared
References
Majumdar, S. K., & Chhibber, P. (1999). Capital structure and performance: Evidence from a
Mouna, A. (2017, October). The impact of capital structure on Firms performance in Morocco.
Research Gate.
https://www.researchgate.net/publication/322488108_The_impact_of_capital_structure_on_Firm
s_performance_in_Morocco