DETERMINANTS OF CAPITAL STRUCTURE: EVIDENCE FROM THE LISTED NATIONALIZED BANKS OF INDIA

Abstract

Purpose – The purpose of this research is to find out the determinants that have an impact on the capital structure of nationalized banks of India during the year 2014-2018. Design/methodology/approach – A Fixed Effect Panel Data Regression Model has been used in this research; the sample period ranges from 2014 to 2018 for 20 nationalized banks in India. Findings – The results largely suggest that the Return on Assets, Firm Size and Number of Audit Committee Meetings are positively significant towards the Debt-to-Equity Ratio while Return on Equity and Assets Tangibility is negatively significant. This research also finds the results with another dependent variable which is the Financial Leverage Ratio, it shows that Return on Equity and Numbers of Auditors are negatively significant while Firm Size is positively significant and the other variables are insignificant towards the Financial Leverage which is Return on Assets, Number of Executive Directors, Number of Non-Executive Director, Number of Board Meetings, Number of Audit Committee Meetings, Non-debt Tax Shields and Assets Tangibility. Research limitations/implications – This research is limited to the 20 nationalized banks of India and for a period of only five years starting from 2014 till 2018. It may not be applicable across the banking sector in India or around the world. Originality/value – The main value of this research is to analyze the determinants that have an impact on capital structure decisions of nationalized banks of India.