Firms’ Life Stage and Capital Structure Decisions
Year: 2011
Type: preprint
Abstract: Background: While there may be a lack of consensus on exactly what drives the capital structure decision, there is no lack of alternative hypotheses. One of these theories, capital structure life stage theory, is conspicuously underdeveloped. Although mentioned in text-books (Damodaran, 2001), mentioned obliquely in some research (for example Morgan & Abetti, 2004), and even referred to in the development of some of the other major theories (for example Myers, 2001), the idea that the capital structure of a firm may be related to its life stage, appears to have received very little direct theoretical or empirical examination. Some of the organizational life stage theory research has suggested that changing life stages may require changes in the way the firm is financed. Thus the firm‟s financing characteristics change from one life stage to the next. Objectives: The present study is aimed at to understand why and how the capital structure decisions of Indian companies changes from one life stage to the next. Methodology: We propose to analyze the financing pattern of 300 Indian private sector companies, comprising of 20 different sectors for the period 1999-2000 to 2007-2008, duly grouping them on the basis of their age as very old, old and new companies. Findings/Results: In this study, we have tried to find out the ways in which different companies at different times and in different institutional environments have financed their operations; and to identify possible implications of these financing patterns on their life stages.
Source: SSRN Electronic Journal
Author: Ashok Kumar Panigrahi
Institution: Narsee Monjee Institute of Management Studies
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2273479439