Title: Capital structure determinants of Indian small and medium auto component enterprises - justifying theories of capital structure

Authors: Sunit Prasad; Rohini Jha; Amar Nath Jha

Addresses: Department of Management, Birla Institute of Technology, Mesra, Ranchi, Jharkhand, India ' Department of Management, Birla Institute of Technology, Mesra, Ranchi, Jharkhand, India ' Department of Management, Birla Institute of Technology, Mesra, Ranchi, Jharkhand, India

Abstract: Academia across the globe has observed that small and medium enterprises face severe financial management issues threatening their survival. The problem Indian SMEs face is how to fund their projects. The present funding scenario heavily depends on their funds and short-term debt. This research examines the firm-specific factors affecting the capital structure of Indian small and medium enterprises (particularly the auto component industry) to understand their financial behaviour. The reason to choose a particular industry is stagnant growth and the rise of sick units yearly; more importantly-the financial behaviour of a specific SME industry has not been analysed so far. The sample comprises 155 non-financial operating firms, and the impact of firm-specific factors on the setups capital structure is gauged using the panel data regression over the period 2006-2017. Analysis reveals that entrepreneurs choose an inappropriate financing ratio based on operating needs.

Keywords: theories of capital structure; SMEs-specific industry; firm-specific factors; panel data regression.

DOI: 10.1504/IJBIR.2026.154652

International Journal of Business Innovation and Research, 2026 Vol.40 No.3, pp.326 - 362

Received: 10 Jun 2022
Accepted: 09 Apr 2023
Published online: 09 Jul 2026 *

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