Abstract
The purpose of this study is to examine the relationship between market-to-book equity ratio and leverage of firms listed on National Stock Exchange of India (NSE). Most of the literature in this debate is from developed countries and they confirmed that there is negative relationship between market-to-book equity ratio and leverage. Results of this paper are same as results of US, France, Germany and UK. This paper discovers that there is negative relationship between market-to-book equity ratio and leverage of Indian firms. Among Indian sectors only market-to-book equity ratio of FMCG, Consumer durables, Automobile and IT had significant and negative relationship with leverage and this relationship for remaining sectors was insignificant. Finally it can be concluded that apart from net tax benefit of debt, future investment opportunities is an important factor for determining the market-to-book equity ratio of firm.
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