Post-COVID influence on Debt structure of Indian Non-Banking Financial Corporation
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Abstract
This research examines the impact of COVID-19 on debt levels in the Indian Non-Bank Financial Companies (NBFCs) sector, focusing on around 11,000 corporations from the CMIE Prowess database. The study uses panel data methodology, interaction analysis, and two-stage least squares method to identify the influence of COVID-19 on leverage ratios from 2017-2022. The findings show that the outbreak of COVID-19 increased the level of debt in the NBFCS sector, with small NBFCs having higher debt levels post-Covid-19 compared to large NBFCs. Additionally, NBFC debt levels are comparatively higher than those of Indian corporations, more than double. The study's limitations include its focus on Indian NBFCs, which can only be generalized to India, but can also be studied in emerging economies. The findings can provide insight into the capital structure status of organizations and the cost bearing on corporations, helping Indian policymakers optimize the capital structure in the NBFC sector. The study also highlights the characteristics of NBFCs that predict debt levels, a novelty that was not previously considered in prior research.