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Corporate Leverage and Financial Decision in the Indian Textile Industry

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Listed:
  • Ramachandran Azhagaiah

    (Pondicherry Central University, India)

  • Selvaraj Sathia

    (Pondicherry Central University, India)

Abstract

In the presence of market imperfections, leverage has the potential to have an important influence on investment decisions. If a firm makes money on its borrowing (has favorable financial leverage), the shareholders realize higher earnings per share (EPS) than would be the case in the absence of debt, as the debt-equity ratio (DER) is a long term risk measure. In the present study 25 textile firms, which are listed in Bombay Stock Exchange are taken as a sample for the study period from 2004 to 2008. The study reveals that the firms i. e. ACM, AFL, ASL, BASML, BCIL, GSM, GDPM and GJML show significant growth rate in financial, operating and combined leverage.

Suggested Citation

  • Ramachandran Azhagaiah & Selvaraj Sathia, 2012. "Corporate Leverage and Financial Decision in the Indian Textile Industry," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 10(1 (Spring), pages 87-114.
    • Handle: RePEc:mgt:youmgt:v:10:y:2012:i:1:p:087-114
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    References listed on IDEAS

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    More about this item

    Keywords

    capital structure; financial leverage; operating leverage; corporate leverage; financial decision; debt equity ratio;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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