Differential Analysis of Various Industries on The Basis of Capital and Asset Structure: An Indian Study

The starting point for this paper is a belief that industry dependence should affect the capital structure of a company. The purpose of this report is to examine the capital structure across different industries for companies quoted on a stock exchange and headquartered in India. The paper demonstrates significant difference in the capital structure depending on the industry where the company operates. The debt ratio sensitivities to the explanatory variables differ significantly between the five industries studied. Almost every significant coefficient obtained in the regressions is in accordance with capital structure theory and other studies. Debt ratio is negatively related to profitability, and age, while asset structure, growth, and company size are positively related. The separate regressions on each industry show that the industries studied are influenced differently. Despite some variation the regression model performed well for the industries, with the R2 ranging from 0.191 to 0.884, signifying that using the same model on every industry may not be fair in the sense that the debt ratio could be governed by different factors for different industries. Keywords: Capital Structure; Static Trade-off; Pecking Order; Industry Effects; Listed Companies