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Asian Journal of Management
Year : 2018, Volume : 9, Issue : 3
First page : ( 1067) Last page : ( 1072)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2018.00169.5

Impact of Capital Structure on Profitability

Rakesh M1,*, Dr. Souza Janet Jyothi D2

1Research Scholar and Asst. Professor, Department of MBA, Vivekananda College of Engineering and Technology, Nehru Nagar, Puttur, D.K

2Associate Professor, Department of Management Studies, Ballari Institute of Technology, Ballari, Karnataka, India, janetjyothidsouza@gmail.com

*Corresponding Author E-mail: rakeshhebbar.m@gmail.com

Online published on 30 January, 2019.

Abstract

Capital structure decision is a very significant area of financial decision making due to its impact on other financial decision variables. Studies have proven the impact of capital structure decision on financial performance. Present study aims at establishing the relationship between capital structure and profitability. Financial variable ROCE is considered as a dependent variable against Debt equity and Debt to market cap ratio being independent. Nifty50 companies over a period of five years (2013–2017) are considered for the purpose of analysis. The data generated is cross sectional time series (Panel Data) in nature. The study employed Panel Data Regression analysis through panel econometric techniques. The results of the study revealed that capital structure is not very significant in determining the profitability of the firm. However there exists a weak negative relationship between capital structure and profitability. The study would definitely contribute towards the conceptual innovations in finance and finance literature.

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Keywords

Capital structure, profitability, value of the firm, financial and non-financial companies.

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