Inter-industry differences in capital structure: Evidence from India

Abstract

The purpose of this paper is to investigate empirically the existence of inter-industry differences in the capital structure of Indian firms and identify the possible sources of such variations in capital structure. The technique used for this cross-sectional analysis is one way analysis of variance and the analysis covers the pre and post-liberalization periods separately to indicate if there is a clear break in the financing pattern of the Indian firms due to the policy shift. Though differences is firm size contributes to the existing variation in financial leverage ratio across industry-classes to some extent, it is the nature of the industry itself or more precisely the differences in the fund requirement of industry groups based on the technology used, which is a potential source of the existing variation.