Title: A study on financial constraints of capital structure theories and dividend policy: evidence from Indian capital market

Authors: Nenavath Sreenu

Addresses: Department of Business Management, Indira Gandhi National Tribal University, (A Central University), Lalpur, Amarkantak, Anuppur (Dist), Madhya Pradesh, 484887, India

Abstract: The study focused on the ability of firms to play this role, which is in major part determined by the structure of the financial system in which they operate and in particular whether this financial system is able to make capital available efficiently to those firms that need it. The study examines the relation between the financing, investments, capital budget and dividend decisions, where the effect of financial constraints on the firm's investment decision is investigated. The study focuses on how financial constraints affect different firms by investigating the extent to which the dependence on internal cash flow is affected by firm characteristics such as size, age, dividend payout ratio and market listing. This implies that firms retain earnings (RE) in order to ensure that they have sufficient capital to invest, confirming the initial result that Indian firms are financially constrained. This study adopted a descriptive design that aims at exploring the financial constraints of dividend policy and capital structure theories of companies listed at NSE and BSE in India. The data was obtained from financial statements and balance sheet of all the listed companies' information available at the NSE and BSE secretariat for ten years from 2005 to 2016.

Keywords: dividend; finance decision; capital market; financial system; profitability ratio.

DOI: 10.1504/JIBED.2019.103371

Journal for International Business and Entrepreneurship Development, 2019 Vol.12 No.1, pp.22 - 36

Received: 22 Jun 2018
Accepted: 30 Jan 2019
Published online: 05 Nov 2019 *

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