Title: Long-run impact of financial restructuring on capital structure

Authors: Anupam Rastogi; Smita Mazumdar

Addresses: School of Business Management, NMIMS, Mumbai, India ' School of Business Management, NMIMS, Mumbai, India

Abstract: This paper empirically investigates the impact of financial restructuring on capital structure of a firm in India. Pre- and post-admission data of firms subjected to financial restructuring are compared using paired sample t-test. Fixed effect panel regression model is used to analyse 15-year (2000-2014) data of 91 firms subjected to financial restructuring to find the relation between leverage and its determinants - profitability, firm size, tangibility and growth opportunity. The empirical results suggest that financial restructuring by itself is not a reason enough for leverage to increase over a period of 15 years. Other factors like profitability, tangibility, growth opportunity and firm size play important roles as well. The model corroborates the explanation provided by the asymmetric information theory and the signalling hypothesis to explain capital structure of a firm.

Keywords: India; corporate debt restructuring; CDR; capital structure; asymmetric information theory; leverage; signalling hypothesis.

DOI: 10.1504/AAJFA.2017.084221

Afro-Asian Journal of Finance and Accounting, 2017 Vol.7 No.2, pp.107 - 129

Received: 19 Apr 2016
Accepted: 10 Aug 2016
Published online: 21 May 2017 *

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