A study on analysis of the determinants of capital structure with special focus on automobile sector of India

Abstract

The choices of capital structure have been the most important choices to be taken by the finance professionals in a corporate sector. Capital structure has fascinated intellectual attention in company finance literature in last few years. However, in the context of financial sector particularly in automobile sector, it has received a petite attention. This study scrutinises the effect of firm level individuality on capital structure of listed automobile companies of India from 2008 to 2014. Ordinary least square regression study indicates that risk, tangibility, size, liquidity and profitability are significant determinants of capital structure of automobile firms of India. In addition, the study also indicates that profitable, more liquid, more tangible and risky automobile firms focus on equity than debt financing or preserved earnings. Thus, the finance executives of automobile companies ought to put emphasis on financing of equity or preserved earnings for the operations of their firms.