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Leverage, foreign borrowing and corporate performance: firm-level evidence for India


  • Saibal Ghosh


This article examines the association between corporate leverage and profitability. Using firm-level data on manufacturing sector in India for 1995-2004, the findings indicate that corporate profitability and cash flows declines as leverage rises. More importantly, the marginal effect of an increase in leverage on earnings is larger for firms that participate in international debt markets than other firms. The results are robust after controlling for the economic environment and various firm-specific controls.

Suggested Citation

  • Saibal Ghosh, 2008. "Leverage, foreign borrowing and corporate performance: firm-level evidence for India," Applied Economics Letters, Taylor & Francis Journals, vol. 15(8), pages 607-616.
  • Handle: RePEc:taf:apeclt:v:15:y:2008:i:8:p:607-616 DOI: 10.1080/13504850600722047

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    References listed on IDEAS

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    Cited by:

    1. Mateja Gabrijelčič & Uroš Herman & Andreja Lenarčič, 2016. "Firm Performance and (Foreign) Debt Financing before and during the Crisis: Evidence from Firm-Level Data," Working Papers 15, European Stability Mechanism.
    2. Hani El-Chaarani, 2014. "The Impact of Financial Structure on the Performance of European Listed Firms," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 103-124.
    3. Fosu, Samuel, 2013. "Capital structure, product market competition and firm performance: Evidence from South Africa," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(2), pages 140-151.
    4. 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.
    5. Samuel Fosu, 2013. "Capital Structure, Product Market Competition and Firm Performance: Evidence from South Africa," Discussion Papers in Economics 13/11, Department of Economics, University of Leicester.
    6. Yu-Yen Ku & Tze-Yu Yen, 2016. "Heterogeneous Effect of Financial Leverage on Corporate Performance: A Quantile Regression Analysis of Taiwanese Companies," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-33, September.

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