*Asstt. Professor, G.S.Moze College of Engineering, MBA Dept.
**Professor, Sinhgad Institute of Business Administration and Research
Online published on 26 September, 2013.
An investment decision of a manager directly affects the future profitability of the business and the financing choice is independent to investment and profitability. But financing choice decision largely affect to the way profit to be distributed among investors. Finance manager decides the strategy by which he can repay the borrowed capital on time to maintain company's goodwill and to maximize shareholder's wealth. The manager is in the dilemma debt or equity as a source of finance. Capital structure is debated subject from last century after M & M proposition on capital structure and firm value. Till date the subject is an area on interest for academic researcher. The research work conducted in developed country is very large as compared to developing countries. After economic reforms managers have free hand to mobilize the funds from domestic to international market. So this is important to study how a finance manager decides capital structure. In this paper attempt has made to find out the determinants of capital structure in Indian chemical industry. The period of the study is 2006 to 2011. Size, profitability, tangibility, non debt tax shield, growth in asset, liquidity and interest coverage ratio has used to analyze their linear relationship with capital structure. Convenience sampling has used to select the sample. Statistical techniques like correlation, multiple regression and ANOVA is used to test the hypothesis. Results show that tangibility, non debt tax shield and interest coverage ratio has linear relationship and rest variable has non linear relationship with capital structure. ANOVA shows the overall model is good.
