Firm-Level Determinants of Cost Structure of the Indian Sugar Industry

Mihir Dash ()

Journal of Applied Management and Investments, 2020, vol. 9, issue 2, 55-62

Abstract: This study examines the firm-level determinants of cost structure for sugar manufacturing companies in India. Cost structure is an important aspect in profitability planning, and particularly so for the Indian sugar manufacturing industry, as sugar production costs have been very high as compared to global sugar production costs. The sample for the study included fifteen listed sugar manufacturing companies for the period 2008-18. The study uses fixed-effects panel regression models, with size (logarithm of total assets), leverage (debt-equity ratio), asset tangibility (fixed assets as a percentage of total assets), growth rate of sales, and profitability (return on assets) as the independent variables, and the raw material expenditure, power/fuel expenditure, employee expenditure, other manufacturing expenditure, and selling/administrative expenditure (as percentages of the total expenditure) as the dependent variables. The study contributes to the literature by considering an area that has not been addressed in the literature, viz. firm-level determinants of cost structure. The key results of the study were significant positive sales growth effects on raw materials expenditure and employee expenditure, and significant negative sales growth effects on power/fuel expenditure and selling/administrative expenditure; a significant negative profitability effect on power/fuel expenditure; significant negative size effects on raw materials expenditure and significant positive size effects on power/fuel expenditure and selling/administrative expenditure; and a significant negative asset tangibility effect on other manufacturing expenditure.

Keywords: cost structure; sugar manufacturing; companies; leverage; asset tangibility; profitability; expenditures (search for similar items in EconPapers)
JEL-codes: D24 G12 L66 (search for similar items in EconPapers)
Date: 2020
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