Leverage and firm's value: An empirical review of concept with reference to high leveraged indian companies

The present study attempts to investigate whether high financial leverage has significant and positive impact on firm's value; For this purpose, after multi stage filtration process, we selected eleven companies, listed on Indian stock exchanges, having more than fifty percent of debt ratio in their capital structure. The time frame for data analysis was from year 2001–2015. The data set was analysed using descriptive analysis (calculating financial ratios viz Return on Equity (ROE), Debt Ratio (DR) and Debt-Equity-Ratio (DER)); descriptive statistics; correlation test and multiple regression analysis. Out of above variables explained in model, ROE was dependent variable representing the firms value and DR and DER were independent variables representing financial leverage. We observed that (DR) has a low degree of positive correlation with (ROE) whereas (DER) has a negative relationship with (ROE). The R Square statistics indicates that most of independent variable (83.6%) are other than independent variables under study (DR and DER) affecting (ROE) and confirms that (DR and DER) are not major factors determining (ROE) of the companies under study for selected period.