Impact of financial decision on start-up firm's financial performance: Empirical evidence from India

This paper aims to empirically investigate the relationship between financing decisions and the financial performance of successful startup firms in India.

The panel data regression has been performed on a sample of 25 startups by taking a time frame from 2016–17 to 2020–21. This study looks at how three capital structure indicators, including the short-term debt ratio, trade credit ratio and long-term debt ratio affect the startup financial performance as measured by ROE and ROA.

The results of the study revealed that capital structure decision made by firms have negatively affect on startup's efficiency. Additionally, among the control variables, firm age, asset turnover and growth, all have a positive significant impact on ROA, whereas only firm age and asset turnover are significant in the case of ROE. This research will help startup entrepreneurs to look at their financing patterns and deciding it cautiously so that they will be able to improve their future performance.

Past studies have focused upon the relationship between financial decsision and firm performance in case of listed matured firms and SMEs, therefore there is a need to explore this relationship in case of startup firms. This study may be the first to examine the impact of financing decision on the performance of successful startup firms in india.