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How do Banks Influence Firm Capital Structure? Evidence from Indian Data

Author

Listed:
  • Ghosh, Saibal

    (Reserve Bank of India, Mumbai, India)

Abstract

Employing data on publicly listed manufacturing firms for the period 1996-2012, the paper examines the interrelationships among leverage, debt maturity and source of debt. The evidence indicates that these three variables are interrelated, with each tending to complement or substitute the other. Disaggregating firms on the basis of equity and board presence, we find that the effect of leverage on debt maturity is the highest for firms that do not exhibit close relationships with banks. Additionally, having no seat on the firm board makes it difficult for banks to exercise control over the firm’s indebtedness.

Suggested Citation

  • Ghosh, Saibal, 2015. "How do Banks Influence Firm Capital Structure? Evidence from Indian Data," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 50(1), pages 1-24.
    • Handle: RePEc:dse:indecr:0094
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    Cited by:

    1. Mohina Saxena & Surajit Bhattacharyya, 2022. "Industry dynamics and capital structure choice: Evidence from Indian manufacturing firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 829-845, April.

    More about this item

    Keywords

    Bank Debt; Asymmetric Information; Leverage;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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