*Assistant Professor, School of Business Studies, Sharda University, Greater Noida, India
**Adjunct Professor, Business Studies, Sharda University, Greater Noida, India
Former Professor, Department of Commerce, Delhi School of Economics, University of Delhi, India
Online published on 6 August, 2014.
The optimum capital structure has been defined as combination of both debt and equity that leads to maximum value of the firm at minimal cost of capital. The capital structure decision can influence the value of the firm through the earnings available to the share holders which maximizes the shareholders wealth, in addition to this capital structure can affect the value of the company by improving it's expected earnings. The importance of an appropriate capital structure is, thus, obvious. Main factors influencing Capital Structure have been studied in this paper to identify the extent of their capital structure effect.
The main purpose is to examine whether and how Capital Structure effect of ten financial variables take place. The impact of ten financial variables namely: size, profitability, asset structure, business risk, debt service, agency cost, bankruptcy ratio, growth, tax shield and uniqueness will be studied on capital structure represented by LEV D/E.
The study attempts to analyze the important determinants of capital structure in Construction sector in India. The data for analysis is drawn from company's official websites for a period of 2002 to 2012; data of top ten listed companies of construction sector has been taken for analysis. Data is analyzed on the basis of multiple regression models.
Profitability, asset structure and opportunity are found to have significant relationship with debt level.
Capital Structure, leverage, profitability, asset structure, business risk, debt service, agency cost, bankruptcy ratio, growth and uniqueness
