Financing decisions are one of the most critical areas for finance managers. It has direct impact on capital structure and financial risk of the companies. It has always been an area for interest for researchers to understand the relationship between capital structure and financial risk of the company. This paper is a moderate attempt to understand impact of financial risk on capital structure decisions in selected Indian industries. For this purpose, the study used definition of capital structure in scope of book value to market value and measures were assumed for financial performance. In this paper, we applied the data of 59 companies listed on Stock Exchange of India in a 10-year time horizon (1997-2007). For the present study, data were collected through the secondary sources.Industries of the study were selected based on ten years' data availability and if the total assets value of the company were more than Rs. 100 crores, the statistical tools used for analyzing them vary from general descriptive analysis such as Mean, Standard Deviation, Coefficient of Variation, Compound Growth Rate to Linear Growth Rate. Also, parametric t-test for ascertaining the level of significance of both compound and linear growth rates and one way analysis of variance, simply called F-test across selected industry sectors have also been used. Results of our study demonstrated that finance risk variables, particularly risk followed by volatility in ROE have significant effect on determining the additional variation in use of debt financing in business through long-term sources among firms under all selected sectors.