1Guest Faculty, Department of Management, Mizoram University, Aizawl, Mizoram-796004, India, Phone No- +918575657797, Email ID: abendangienla@yahoo.com Corresponding Author
2Assistant Professor, Department of Management, Mizoram University, Aizawl, Mizoram-796004, India, Phone No- +918731823816, Email id- biswajitghose84@gmail.com
Online published on 4 October, 2019.
In corporate finance, capital structure is one of the mostly researched topics. Capital structure decision is about deciding the best mix of debt and equity in total capitalization of the firm. Earlier research shows that there are several factors which affect the debt-equity mix of firms and one such factor is firm's industry affiliation. The present study investigates the capital structure of manufacturing and non-manufacturing firms. Using a dataset of 1785 listed Indian firms over a period of 2005–2016, the study observes that manufacturing firms have substantially higher leverage ratio compared to non-manufacturing firms over the period of study. Further, manufacturing firms are larger in size, have higher tangibility, profitability, non-debt tax shield and uniqueness compared to non-manufacturing firms. Confirming the results of univariate analysis i.e. t-test and rank-sum test, the panel random effect regression model also shows positive impact of manufacturing firms on leverage ratio. The findings of the study expected to provide guidance to financial managers in deciding their capital structure.
Capital structure, manufacturing firms, non-manufacturing firms, pecking order theory, trade-off theory
