Business Cycles and Capital Structure Choices: Evidence from India
Aparna Bhatia
Pooja Kumari 
Abstract
The paper explores variations in leverage ratios of industries grouped on the basis of business cycles – as growth industry, defensive industry and cyclical industry. Leverage is measured using Total debt to Net worth ratio, Long term debt to Net worth ratio and Short term debt to Net worth ratio. The debt ratios of industries are evaluated during two time phases– Phase I (2008/09 to 2012/13) and Phase II (2013/14 to 2017/18). The sample consists of 172 companies randomly selected from the largest 500 companies in India. The results suggest significant variations in the debt ratios of industries in each of the time phases. The results also show statistically significant variations in total and long-term debt ratios between Phase I and Phase II. The study is distinct as it gives a new insight into the capital structure decisions of industries using a novel industrial classification base.
Keywords: Capital Structure, Business Cycles, Debt Ratios, Industry, India
Volume 14, Issue 2
December 31, 2023
Pages:1-31
DOI: https://doi.org/10.4038/cbj.v14i2.154
Suggested citation:
Bhatia, A. & Kumari, P. (2023). Business cycles and capital structure choices: Evidence from India. Colombo Business Journal, 14(2), 1-31. https://doi.org/10.4038/cbj.v14i2.154
Aparna Bhatia
University School of Financial Studies, Guru Nanak Dev University, India
Pooja Kumari
University School of Financial Studies, Guru Nanak Dev University, India
