Governance Framework Influencing the Capital Structure Decisions: An Empirical Study of Listed Indian Companies

Abstract

The present study is an attempt to provide empirical evidences for how India’s Governance framework influences the capital structure of Indian listed companies. A sample of 255 nonfinancing Indian listed companies has been empirically investigated using panel data technique for a period from 2008 to 2016. Governance indicators i.e. rule of law, regulatory effectiveness and control on corruption have been studied to analyze their influence on capital structure decisions. Rule of law is found to be positively and statistically significantly influencing capital structure decisions of Indian companies whereas for regulatory effectiveness , results suggest long term debt to be positively and significantly associated, however this relationship is insignificant when capital structure is measured in terms of total debt to total assets though positive. A very significant but negative impact of corruption on leverage has been found.