Vol: 3, Issue: 3 2013

Page: 20-39

Corporate Capital Capital Structure Practices

Naresh Vashist

This research paper is the study of the corporate investment in Information Technology Industry and in the Banking Industry. The study examines the trends and determinants of capital structure in Indian Banking and IT industries from the perspective of empirical capital structure literature. There are several fundamental disparities between financial and non financial firms that contribute to large difference in their capital structure position. However, the theory of Corporate Capital Structure that evolves in recent years provides a useful framework for analyzing bank capital structure. Two independent variables, specifically, Profitability and Growth Opportunities are the chief fragments that generally direct capital structure decisions in this industry. Nevertheless, these capital structure decisions are not straightforward. Four independent variables, specifically, Tangibility of assets, Size of the company, Volatility and Non debt tax shield are the major aspects directing capital structure decisions in the industry. The regression coefficient of size of company is showing significant impact of this variable on decisions related to capital structure of Indian IT industry. However, it has negative relation with capital structure. Present study largely confirms the results of earlier Indian studies vis-à-vis IT Industry but this is not the case with Banking Industry; Banking Industry results confirm the results of research carried out in developed countries.