Corporate Leverage and Financial Decision in the Indian Textile Industry

Ramachandran Azhagaiah and Selvaraj Sathia
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Ramachandran Azhagaiah: Pondicherry Central University, India
Selvaraj Sathia: Pondicherry Central University, India

Managing Global Transitions, 2012, vol. 10, issue 1 (Spring), 87-114

Abstract: In the presence of market imperfections, leverage has the potential to have an important influence on investment decisions. If a firm makes money on its borrowing (has favorable financial leverage), the shareholders realize higher earnings per share (EPS) than would be the case in the absence of debt, as the debt-equity ratio (DER) is a long term risk measure. In the present study 25 textile firms, which are listed in Bombay Stock Exchange are taken as a sample for the study period from 2004 to 2008. The study reveals that the firms i. e. ACM, AFL, ASL, BASML, BCIL, GSM, GDPM and GJML show significant growth rate in financial, operating and combined leverage.

Keywords: capital structure; financial leverage; operating leverage; corporate leverage; financial decision; debt equity ratio (search for similar items in EconPapers)
JEL-codes: G30 G32 G35 (search for similar items in EconPapers)
Date: 2012
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