Study any Public LTD company and find out details of its capital structure.
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Answer:
A company's proportion of short and long-term debt is considered when analyzing capital Structure. When people refer to capital structure they are most likely referring to a firm's debt-to-equity ratio, which provides insight into how risky a company is. Usually a company more heavily
The present study has two objectives: Firstly, to identify important determinants of capital structure and secondly to verify for the applicability of trade-off and pecking order theory. A period of study is from 1977-78 to 2006-2007 which has been divided into two equal halves designated as pre and post liberlisation for better understanding. Data for the present study comprise consolidated sources and uses of funds of Indian Public Limited companies obtained from various issues of RBI bulletin. Capital structure, the dependent variable, is considered in two forms viz., total debt to total assets and long term debt to total assets. Six explanatory variables are firm size, asset structure, non-debt tax shield (NDTS), cash, growth opportunities and profitability. The explanatory power of the model measured in terms of R 2 in the total time period is 62% and 66% for total debt and long term debt respectively. Once the study period is divided into pre and post liberalisation a dramatic change occurred in the explanatory power as the value of R 2 is 93% and 98% for the same variable in the pre liberalisation period and 86 % and 80% for post liberalisation. Similarly the significance of variables changed in different time periods. It shows that variables have varied importance in various times periods. It is confirmed by chow test. The regression analysis suggests applicability of both the theories.