Sector and Firm Specific Variance Composition of Capital Structure: A Panel Data Analysis on Indian Chemical Industry
Keywords:
Leverage decision, Variance, Multilevel regressionAbstract
All corporate strategies are cast in background of external environment in consideration that firms cannot operate in isolation. Industry characteristics along with peer firms substantially influence and subsequently set boundaries for all strategic decisions related to financing, investing and growth decisions. Also the changes in macroeconomic situations of country and its dealings with other countries impact the monetary and fiscal policies will impact the firm decisions. The paper presents empirical examination of impact from firm, sector and year specific factors that influence the leverage decisions of firm. Multilevel regression model is expended to explain concurrently cross-sectional and time-series dependency. Hierarchical data is used to estimate the variance composition of the leverage variable. The result indicate that variance in leverage is largely contributed by firm-specific factors, advocating financial decisions linked to strategic management.
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