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Stream/Area:
-
Subject:
-
Paper ID:
IJSREM67837
Volume:
10 |
10 |
Oct 2026
Pages:
1-17
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
Financial management
Ramaiah University of Applied Science
Financial management
Ramaiah University of Applied Science
Financial management
Ramaiah University of Applied Science
The paper evaluates the determinants of capital structure of India’s Nifty 50 Non-Financial publicly listed companies and the effects of macroeconomic determinants after controlling for firm-specific determinants of leverage. The regres-sion analysis was performed using pooled ordinary least squares method on the debt to equity ratio and debt ratio with respect to five firm-specific variables and four macroeconomic variables from a sample of 195 firm-year observations of 39 non-financial Nifty 50 firms over FY 2020-21 to FY 2024-25 (186 observations after dropping near-zero-equity observations). The leverage varies to a large extent with industry, the five-year averages of debt ratio varied between 7.7% for IT Services to 39.8% for infrastructure, industrials, and telecom industries. The firm characteristics account for up to one-third of the cross-sectional variation in leverage (adjusted R² = 0.34 in both models): profitability is the most influential negative determinant while tangibility, firm size, and liquidity are positively correlated whereas growth is insignificant. The macroeconomic determinants fail to explain any cross-sectional variation in leverage (adjusted R² < 0) despite an inverse correlation between average leverage and repo rate during five years. It can be seen that there is a presence of a pecking order and trade-off theory in addition to fundamental based financing strategy rather than macro-economic based financing strategy. The research reveals that just one occurrence of zero equity could obscure the entire relationship. The explanatory power of the determinants is used to derive recommendations for corporate managers, in-vestors and lenders, and policymakers.
KEYWORDS
The paper studies the capital structure of non-financial Nifty 50 companies for the period FY 2020-21 to FY 2024-25 which spans the period post a contraction induced by the pandemic, followed by the recovery period and then a period of monetary tightening. Three results can be summarized from this research. First, leverage has been found to be extremely sector-specific where the leverage ratio ranged from 7.7% to 39.8% among sectors. In the sample, firm-level variables determine around one-third of the leverage with the profitability of a firm having a negative effect on leverage, the size and tangibility of a firm having a positive effect on leverage and the liquidity of a firm having a negative effect. Second, there is no association between macroeconomic variables and leverage. Finally, even though the leverage is negatively related with the repo rate and credit spread on average, there is no firm-level reaction to any macroeconomic variables in the leverage decision of the firm.
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Publication Date
10/12/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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