Determinants of Capital Structure – A study of selected Pharma Companies

Abstract

Capital structure is fundamentally permanent long term financing of a firm. The objectives of this study are to identify the significant determinants of capital structure of the listed Pharmaceutical companies in NSE/BSE during the period 1999–2013. In relation to the study determinants are considered are profitability, tangibility, growth, size, debt service capacity, tax rate, non debt tax shields, financial leverage cost of debt and cost of equity. The study uses correlations and multiple regression analysis, to find the relationship between Debt-equity ratio (i.e., Dependent variable) and determinants of capital structure (independent variables), The policy implication is that the financial managers should consider these determinants as yardsticks before taking the leverage decisions in order to choose the most favorable capital structure for the company so that it maximizes the shareholders’ value.