Impact of Foreign Ownership on Leverage: A Study of Indian Firms

Surbhi Gupta, Surendra S. Yadav and P. K. Jain

Global Business Review, 2024, vol. 25, issue 1, 51-67

Abstract: Capital structure choice is a corporate decision which provides a combination of securities used to finance the investment requirements ( Myers, 2001 ). That the ownership of a firm influences its decision-making process is a well-accepted economic proposition. Due to liberalization and continuous measures initiated by the Indian government to make India more business-friendly, foreign ownership has assumed a prominence in many Indian firms. In this regard, this article aims to examine the impact of foreign ownership on the financing mix, employing the data of non-financial firms constituting the Nifty 200 index, for the period 2007–2018; the data have been extracted from Bloomberg® and Ace Equity®. Using the generalized method of moments (GMM) technique for empirical analysis, the study observes that there is a statistically significant negative relationship between foreign ownership and leverage.

Keywords: Capital structure; leverage; foreign ownership; foreign direct investment; generalized method of moments (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:25:y:2024:i:1:p:51-67

DOI: 10.1177/0972150920927360

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