SMART JOURNAL OF BUSINESS MANAGEMENT STUDIES |
VOL. 6 |
NO. 2 |
PAPER 3 |
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CAPITAL STRUCTURE DECISION: AN EMPIRICAL INVESTIGATION IN INDIAN INFORMATION TECHNOLOGY SECTOR |
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Bidyut Jyoti Bhattacharjee |
Faculty of Commerce, B.H College, Howly, Assam, India |
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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. |
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