SMART JOURNAL OF BUSINESS MANAGEMENT STUDIES VOL. 6 NO. 2 PAPER 3
 
CAPITAL STRUCTURE DECISION: AN EMPIRICAL INVESTIGATION IN INDIAN INFORMATION TECHNOLOGY SECTOR
 
Bidyut Jyoti Bhattacharjee
Faculty of Commerce, B.H College, Howly, Assam, India
 
The capital structure consists of debt and equity and the firms try to maintain appropriate financing mix to attain target capital structure. Modern capital structure theory stems from the influential article on finance by Nobel Laureates, Professor Franco Modigliani and Merton H. Miller in the year 1958. Many theories developed over the years since 1958, which explain the determinants of capital structure decisions. The Trade-Off Theory and Signaling Theory in particular, play a crucial role in identifying and testing the various properties of leverage decisions. This paper briefly tries to find out whether some a priori assumed macroeconomic determinants can be related to the leverage. For this purpose, an empirical study was undertaken on Indian Information Technology Sector, covering 22 selected firms traded in BSE. The paper highlights creditor rights, maintenance of legal reserves and law enforcement, directors’ rights on borrowing, risk assessment as essential determinants of capital structure decision of a firm.
 
KEYWORDS: BSE, Trade Off Theory, Leverage, Capital Structure JEL CLASSIFICATIONS: L86, G32, L52 FULL TEXT