A Panel Data Analysis On Determinants Of Debt Capital Of Selected Indian Companies

Abstract

Generating capital structure decisions is necessary for any company organisation while optimising firm value is a difficult undertaking that requires choosing debt and equity securities in a balanced ratio while taking into account the various costs and benefits associated with each security. Understanding a company's debt capital drivers is important since it enables stakeholders, including investors, to make well-informed decisions. Businesses with high leverage ratios and aggressive capital structures typically fund their assets and operations primarily through debt rather than equity. Conversely, companies with low leverage ratios and conservative capital structures rely more on equity financing to support their assets. While a cautious approach to capital structure may lead to slower growth, a high leverage ratio and aggressive capital structure can promote faster growth. Debt financing thus plays an essential role in supporting business expansion. This study aims to examine the factors affecting debt financing in select Indian companies. The findings reveal that dependent variables influence the independent variables across these companies, with total debt capital significantly impacting the financial performance of those selected. This research establishes a framework for exploring the determinants of capital structure in Indian companies, paving the way for a more detailed analysis.