Factors Affecting Capital Structure Decisions : Empirical Evidence from Selected Indian Firms

The main objective of this paper is to analyze the factors determining the capital structure of Indian companies. This analysis is grounded on agency theory and pecking order theory. The paper takes into consideration dependent variable being debt equity ratio and independent variables viz. size, growth, profitability, liquidity and tangibility. The data for a sample of 30 companies constituting Bombay Stock Exchange's SENSEX (sensitivity index) was considered for a period comprising 2008-2010. Present paper has identified determinants of capital structure with the help of correlation and regression analysis. Two major determinants of capital structure are found to be growth and liquidity according to the results of the study