Effects of Ownership Structure on Capital Structure of Indian Listed Firms: Role of Business Groups vis-à-vis Stand-Alone Firms

Indrani Chakraborty

Emerging Markets Finance and Trade, 2018, vol. 54, issue 10, 2315-2332

Abstract: The objective of this study was to explore the relationship between promoter ownership and capital structure of firms’ using a sample of Indian publicly listed firms for the period from 2006 to 2013. We find that the relationship between promoter ownership and leverage is inversely U-shaped in group-affiliated firms, whereas in stand-alone firms there is a U-shaped relationship. We argue that a substantial presence of family owners and the selection of managers from within the family play some role for such relationship in group-affiliated firms. On the other hand, the argument for observed relationship in stand-alone firms follows from alignment hypothesis, entrenchment hypothesis, managerial risk aversion hypothesis, and active monitoring hypothesis.

Date: 2018
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DOI: 10.1080/1540496X.2018.1434071

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