Sky Journal of Business Administration and Management Vol. 3(6), pp. 063-069, November, 2015. Available online,
ISSN 2315-8778 ©2015 Sky Journals


Full Length Research Paper

Determinants of capital structure in the Indian sugar sector


April Bhattacharjee and Mihir Dash*


Alliance School of Business, Alliance University, Bangalore, India.


*Corresponding author. E-mail:

Accepted 7 September, 2015





Capital structure is one of the most important decisions in financial management. The primary objective of the firm is to maximize shareholders’ wealth by an appropriate mix of the main sources of finance, including retained earnings, ordinary shares, preference shares, and debt. The primary objective of the study was to identify the key determinants of capital structure in the Indian sugar sector. The data for the study was collected from the financial statements for a sample of twenty-five companies in the Indian sugar sector for the period 2003-11 from the Capitaline database. The analysis was performed using pooled regression (OLS), and panel regression (GLS fixed-effects and random-effects) modeling. The latter approach is a contribution to the capital structure literature, viz. comparing the results of pooled and panel regressions in order to overcome the limitations pooled regression methodology, and to examine the role of firm-specific factors in capital structure decisions. The results of the study suggest that financial leverage is significantly positively related with collateralizable value of assets, and significantly negatively related with profitability. Thus, in a highly capital-intensive industry as the sugar industry, companies prioritise their sources of financing, preferring internal funds, followed by debt, and finally equity issues, as sources of finance.

Key words: Capital structure, sources of finance, pooled regression, panel regression, fixed-effects, random-effects.


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