Determinants of Firms’ Propensity to Use Intercorporate Loans: Empirical Evidence from India

Biswajit Ghose, Prasenjit Roy, Yeshi Ngima, Kiran Gope, Pankaj Kumar Tyagi, Premendra Kumar Singh () and Asokan Vasudevan
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Biswajit Ghose: Department of Commerce, Tezpur University, Napaam 784028, India
Prasenjit Roy: Department of Commerce, Tezpur University, Napaam 784028, India
Yeshi Ngima: Department of Commerce, Tezpur University, Napaam 784028, India
Kiran Gope: Department of Management, Mizoram University, Aizawl 796004, India
Pankaj Kumar Tyagi: University Institute of Tourism and Hospitality Management, Chandigarh University, Mohali 140413, India
Premendra Kumar Singh: Centre for Distance and Online Education, Sharda University, Greater Noida 201310, India
Asokan Vasudevan: Faculty of Business and Communications, INTI International University, Nilai 71800, Malaysia

Risks, 2025, vol. 13, issue 4, 1-19

Abstract: Several studies have investigated the determinants of firms’ capital structure choices. Though an intercorporate loan is an essential source of corporate debt, there are no studies that examine the determinants of firms’ preference to use the intercorporate loan as a source of debt. This study examines the relevance of the conventional capital structure determinants in explaining firms’ tendency to use intercorporate loans. The study is based on a dataset of 53,112 firm-year observations comprising 3739 non-financial listed Indian firms for 21 years from 2002 to 2022. The random effect logistic regression model is used to investigate the objectives. The conventional capital structure determinants are relevant in explaining firms’ decisions to use intercorporate loans. Firm size, asset tangibility, and earnings volatility favorably influence the tendency to use intercorporate loans, whereas profitability, growth, uniqueness, dividend payment, ownership concentration, and foreign promoter holdings adversely affect the same. The results reveal that the influence of firm size, uniqueness, earnings volatility, and ownership concentration are not unidirectional for group-affiliated and standalone firms. The findings are mostly consistent with the arguments of conventional capital structure theories. The results of this study will be pragmatic for financial managers in their capital structure decisions.

Keywords: intercorporate loans; capital structure; financial leverage; logistic regression; India; economic (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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