Determinants of Capital Structure Decisions: A Study of Indian Telecom Sector

Hemal Bharat Pandya


Determinants of Capital Structure Decisions:

A Study of Indian Telecom Sector


Dr. Hemal Pandya



Capital is the major part of all kinds of business activities, which are decided by the size, and nature of the business concern. If the company maintains proper and adequate level of capital, it will earn high profit and they can provide more dividends to its shareholders. Several researches have been found on identifying the determinants of capital structure but majority of them are of foreign countries and there is no single opinion on the actual determinants of capital structure. Different studies have been done on various manufacturing sectors and different results have been obtained indicating that the determinants of capital structure may vary across the different sectors. The telecommunications marketplace is changing rapidly and telecom operators must remain responsive in order to keep up. Their prospective growth requires them to maintain strong capital base and sound capital structure. Hence an attempt has been made to identify the major determinants of capital structure decisions for selected Indian Telecom Companies. The independent variables have been considered keeping in view Agency Theory, Pecking Order Hypothesis and other established capital structure models. The all the selected companies rely upon different determinants for deciding their capital structure decisions. Hence a precise and common determinant of capital structure for all the companies cannot be identified. Thus a separate analysis of the determinants of capital structure is necessary for different companies in this sector. But it can be noted that the companies with higher profitability rely more upon Debt sources rather than equity sources.

Key Words: Financing Decisions, Pecking Order Theory, Agency Theory, Indian Telecom Sector



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ISSN : 2251-1547