Factors affecting the capital structure of companies in Indian energy sector

What is it about?

Capital structure theories and empirical literature have been reviewed to formulate propositions concerning the factors/variables determining the capital structure of Indian energy companies. The examination is done using panel data techniques for the sample 141 companies operating in the Indian energy sector. The results show firms’ age, asset turnover ratio, liquidity and firms’ size to be significant determinants of capital structure for the Indian energy companies, while profitability, debt service capacity, sales growth, non-debt tax shield and tangibility ratio to be insignificant determinants.

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Why is it important?

The current research gives an insight into the determinants of capital structure of the companies engaged in the Indian energy sector, which are mostly overlooked due to the laws, policies and regulations governing the sector as a whole.