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Capital structure in an emerging stock market: The case of India

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  • Chakraborty, Indrani
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    Abstract

    This paper applies two alternative methods of estimation, viz., fully modified OLS (FMOLS) and generalized method of moments (GMM), to analyse the determinants of the capital structure of Indian firms using a panel of 1169 non-financial firms listed in either the Bombay Stock Exchange or the National Stock Exchange over the period 1995-2008. The results thus obtained are robust across the estimation methods. Among the three alternative theories of capital structure, the pecking order theory and the static trade-off theory both seem to explain Indian firms' decisions. However, there is little evidence to support the agency cost theory.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 24 (2010)
    Issue (Month): 3 (September)
    Pages: 295-314

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    Handle: RePEc:eee:riibaf:v:24:y:2010:i:3:p:295-314

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    Web page: http://www.elsevier.com/locate/ribaf

    Related research

    Keywords: Capital structure Financial sector Panel data Fully modified OLS estimation GMM estimation India;

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    Cited by:
    1. Hearn, Bruce, 2010. "Time varying size and liquidity effects in South Asian equity markets: A study of blue-chip industry stocks," International Review of Financial Analysis, Elsevier, vol. 19(4), pages 242-257, September.
    2. Wang, Daphne & Esqueda, Omar A., 2014. "National cultural effects on leverage decisions: Evidence from emerging-market ADRs," Research in International Business and Finance, Elsevier, vol. 31(C), pages 152-177.
    3. Miguel Acedo-Ramírez & Juan Ayala-Calvo & José Rodríguez-Osés, 2013. "Capital structure of small companies in the Spanish footwear sector: relevant factors," SERIEs, Spanish Economic Association, vol. 4(2), pages 155-173, June.

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