The Determinants of Capital Structure of Indian Power Generation and Supply Firms: Panel Data Anal..
The current study examines the determinants of capital structure using firm level data from Indian power generation and supply from 1993 to 2004. The results of the Static Panel data model with firm and time effects show that variables size (SIZ) and tangibility (TAN) are positive and significant, profit (PRO) and cost (COS) are negative and significant, except liquidity (LIQ) and growth opportunities (GRO) in the random effects with firm and time. These findings suggest that power generation companies are larger and have more physical assets. Furthermore, the existence of significant financial theories such as Static Trade-off Theory, Information Asymmetry Theory, and Agency Cost Theory is supported by the positive association between tangibility and debt variable. The negative profit sign (PRO) indicates that power production companies are not fully reliant on debt. This rationale proves that Pecking Order Hypotheses exist. The negative sign of cost (COS) indicates that interest on debt is viewed as an expense, lowering tax liability. In both impacts, the results on the association between growth opportunities and leverage are favourable but not significant. This link suggests that power producing companies will expand. They also require additional capital to satisfy the investment prospects.
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