AN EMPIRICAL ANALYSIS TO STUDY THE RELATIONSHIP BETWEEN PROFITABILITY AND CAPITAL STRUCTURE DECISIONS IN INDIAN SCENARIO
Abstract
The present study has been undertaken to investigate into the independent variables related to capital structure decisions influencing the profitability of the companies belonging to BSE Sensex. The time period of the present study is from 2010-11 to 2016-17 (i.e. for 6 years). The independent variables have been selected after a thorough review of literature. Five independent variables related to capital structure decisions which are taken into consideration for the study are “Size of the Firm (log sales)”, “Debt Equity ratio”, Interest Coverage Ratio”, “Growth rate ( Assets)” and “Non-Debt Tax Shield”. The proxy for the profitability taken for the study is “Return on Assets” and “Return on Net Worth”. VIF has been utilized to understand if any multi-collinearity exists among the independent variables. Multiple regression analysis has been utilized separately to understand which independent variables are significantly influencing the dependent variables namely “Return on Assets” and “Return on Net worth” respectively. A further endeavour has been made in this paper to rank the independent variables that are significantly influencing the dependent variables as per their beta values. SPSS 20.0 has been used for analysis purpose. Based on the results of the study the corporate houses can develop policy decision on capital structure.
Keywords:
Multiple Regression Analysis, Profitability, Sensex, Capital Structure, CorporateDownloads
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