Statistics

Profitability index

Econometrics

Capital structure

Microeconomics

Profit (economics)

Financial capital

Debt

Economics

Ordinary least squares

Capital formation

Finance

Risk-adjusted return on capital

Business

Mathematics

Debt ratio

Descriptive statistics

Regression analysis

Stock exchange

Fixed effects model

Panel data

Jindal Journal of Business Research

One of the most perplexing issues faced by finance managers is to know about the effect of capital structure on the profitability of firm. Many studies have been carried out to examine the effect of capital structure on the profitability of firms, but most of them belong to other parts of the world, and only few studies have been conducted in India. Thus, the present study has been undertaken to evaluate the effect of capital structure on the profitability of Nifty 50 companies listed on National Stock Exchange of India from 2008 – 2017. The data has been analyzed by using descriptive statistics, correlation and multiple panel data regression models. Four different regression models have been used to study the relationship between capital structure and profitability. In these models, we study the individual effect of total debt and total equity ratios on profitability, that is, ROA and ROE. All four models have been tested with pooled OLS, fixed effects, and random effects. We conclude that there is significant positive impact of capital structure on firm’s profitability.

The Effect of Capital Structure on Profitability: An Empirical Panel Data Study