Debt Financing, Agency Cost and Firm Performance: Evidence from India

Krishna Dayal Pandey and Tarak Nath Sahu

Vision, 2019, vol. 23, issue 3, 267-274

Abstract: This empirical investigation attempts to enquire into the relationship among debt financing, agency cost and performance of Indian manufacturing firms. The study tries to document the impact of debt financing on firm performance in two different phases of panel data estimations. In the first phase, the study enquires the effect of debt on firms’ profitability measured by ‘return on equity’. The second phase tries to empirically explain the reason behind such impact by introducing agency cost. Considering the manufacturing firms traded in the BSE 200 Index from 2009–2016, the study documents a significant and negative effect of debt on firm performance. The magnitude of debt is also found to be positively affecting the agency cost measured by ‘general and administrative expenses’. So the negative effect of debt on firm performance is reinforced and justified as debt is also found to elevate the agency costs for the firms.

Keywords: Capital Structure; Leverage; Agency Cost; Firm Performance; Panel Data Analysis (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0972262919859203 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:vision:v:23:y:2019:i:3:p:267-274

DOI: 10.1177/0972262919859203

Access Statistics for this article

More articles in Vision
Bibliographic data for series maintained by SAGE Publications ().