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Determinants of Capital Structure in India (1990-1998): A Dynamic Panel Data Approach

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Author Info

  • Guha-Khasnobis, Basudeb

    ()
    (The United Nations University)

  • N. Bhaduri, Saumitra

    ()
    (Indian Council for Research on International Economic Relations)

Abstract

Conventional wisdom on capital structure choices has been by and large confined to the United States and a few advanced countries having institutional similarities. In this paper we make an attempt to provide some insight into the capital structure choice of developing countries through a case study of the Indian corporate sector. We develop a dynamic panel data model that explicitly takes into account the possibility of adjustment cost to reach optimal capital structure. The results suggest that restructuring cost is important in adjustment towards an optimal capital structure. We identify the key determinants of the speed of adjustment towards optimal capital structure and also highlight important differences across cohorts formed on the basis of firm-specific attributes.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 17 (2002)
Issue (Month): ()
Pages: 761-776

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Handle: RePEc:ris:integr:0219

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: Capital Structure; India; Panel Data; Adjustment Cost;

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Cited by:
  1. Majumdar, Raju, 2013. "A Reinterpretation of the Relation between Market-to-book ratio and Corporate Borrowing," MPRA Paper 52398, University Library of Munich, Germany.
  2. Majumdar, Raju, 2012. "The role of secured debt in resolving agency conflicts and problems of asymmetric information: Indian evidence," MPRA Paper 37925, University Library of Munich, Germany.
  3. Majumdar, Raju, 2012. "The Determinants of Indebtedness in Unlisted Manufacturing Firms in India: A Panel Data Analysis," MPRA Paper 43427, University Library of Munich, Germany.

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