Title: An empirical study of the impact of operating and financial leverages on the performance of select Indian firms listed on the National Stock Exchange in India

Authors: Rahul Nandi; Pradipta Banerjee

Addresses: Sidho-Kanho-Birsha University, Purulia, West Bengal, India ' Sidho-Kanho-Birsha University, Purulia, West Bengal, India

Abstract: The paper examined the impact of leverages on the performance of firms chosen from 12 prominent industries over ten years. The study used panel data regression and for selecting the suitable model, model selection tests have been employed. The firms have been chosen based on median assets size from every twelve major industries listed in NSE. In addition, some diagnostic tests have been conducted. The study found that sample firms are not highly levered, and leverages are not significant determinants of all the measures of performance except market capitalisation. Bankruptcy probability is the most consistent determinant whereas tangibility, size, and financial leverage are substantial but not consistent determinants in each model. The study did not reveal any significant relationship between operating and financial leverage. It has been found that firms are adhering to the pecking order theory.

Keywords: operating leverage; financial leverage; panel data regression analysis; Hausman test; Breusch Pagan LM test; restricted-F test; pecking order theory; India.

DOI: 10.1504/IJICBM.2023.136229

International Journal of Indian Culture and Business Management, 2023 Vol.30 No.4, pp.478 - 496

Received: 02 May 2022
Accepted: 13 Jul 2022
Published online: 22 Jan 2024 *

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