Factors Influencing on Capital Structure in India with Special Reference to CNX Junior NIFTY

Abstract

This study examines the factors that influence the capital structure of companies listed on India's CNX Junior Nifty index. Capital structure refers to the combination of debt and equity financing utilized by a company. The capital structure choice is one of the most critical decisions made by financial management. The study investigates the factors that influence the capital structure, considering the debt-equity ratio as the dependent variable and liquidity, profitability, growth, tangibility, and size as independent variables. The study employs a quantitative methodology, utilizing correlation analysis, multiple regression analysis and panel data analysis, to assess the impact of financial variables on the DER. A sample of 40 companies constituting the National Stock Exchange's CNX Junior Nifty was analyzed from 2020 to 2023 The study reveals that while Profitability (ROE) consistently exhibits a significant negative relationship with the DER, other variables such as Liquidity, Growth, Tangibility, and Size exhibit varying degrees of correlation but lack consistent statistical significance. The findings provide valuable insights into the factors that impact the capital structure decisions of Indian companies in the context of the CNX Junior Nifty index.