Impact of Financial Performance on Capital Structure: Investigation of Indian Automobile Sector

SWATI SHARMA - Assistant Professor

Abstract

Our study aims to analyse the impact by profitability, asset size, growth, leverage and liquidity on the capital structure of a firm. To empirically examine the impact, top 5 leading automobile companies listed on NSE/BSE. To analyse the impact, study has applied ordinary least square (OLS) regression to evaluate the impact of identified variables on capital structure of selected Financial variables. The models are diagnosed for autocorrelation, multicollinearity, homogeneity and normality of standard residuals. The selected companies showed that theirexplanatory variables are explaining the variances of dependent variables above 80 percent and the model were significant at 5 percent level of significance using F test. For M&M, the variables NP/TA, Gro and LIQ have positive relation whereas LN-TA has negative relation dependent variables. All variable, except Gro have significant relation with capital structure. For Force Mo, the variables NP/TA, Gro, NDTS have positive relation whereas LN-TA and LIQ have negative relation dependent variables. All variables had insignificant relation with capital structure.