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Corporate Leverage and Financial Decision in the Indian Textile Industry

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  • Ramachandran Azhagaiah

    (Pondicherry Central University, India)

  • Selvaraj Sathia

    (Pondicherry Central University, India)

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    Abstract

    In the presence of market imperfections, leverage has the potential to have an important influence on investment decisions. If a firm makes money on its borrowing (has favorable financial leverage), the shareholders realize higher earnings per share (EPS) than would be the case in the absence of debt, as the debt-equity ratio (DER) is a long term risk measure. In the present study 25 textile firms, which are listed in Bombay Stock Exchange are taken as a sample for the study period from 2004 to 2008. The study reveals that the firms i. e. ACM, AFL, ASL, BASML, BCIL, GSM, GDPM and GJML show significant growth rate in financial, operating and combined leverage.

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    Bibliographic Info

    Article provided by University of Primorska, Faculty of Management Koper in its journal Managing Global Transitions.

    Volume (Year): 10 (2012)
    Issue (Month): 1 (Spring) ()
    Pages: 87-114

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    Handle: RePEc:mgt:youmgt:v:10:y:2012:i:1:p:087-114

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    Related research

    Keywords: capital structure; financial leverage; operating leverage; corporate leverage; financial decision; debt equity ratio;

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    References

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    1. Robert Brooks & Bhavish Jugurnath & Mark Stewart, 2004. "Dividend taxation and Corporate investment: A comparative study between the classical system and imputation system of dividend taxation in the United States and Australia," Econometric Society 2004 Australasian Meetings 97, Econometric Society.
    2. Andrew Benito & John Whitley, 2003. "Implicit interest rates and corporate balance sheets: an analysis using aggregate and disaggregated UK data," Bank of England working papers 193, Bank of England.
    3. Alfonsina Iona & Leone Leonida & Aydin Ozkan, . "Determinants of Financial Conservatism: Evidence from Low-Leverage and Cash-Rich UK Firms," Discussion Papers 04/01, Department of Economics, University of York.
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