Theoretical Economics Letters

Volume 7, Issue 4 (June 2017)

ISSN Print: 2162-2078   ISSN Online: 2162-2086

Google-based Impact Factor: 1.19  Citations  h5-index & Ranking

Impact of Capital Structure on Firm Value: Evidence from Indian Hospitality Industry

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DOI: 10.4236/tel.2017.74067    4,995 Downloads   22,075 Views  Citations

ABSTRACT

This study examines the effect of capital structure and firm quality on firm value of selected BSE listed Indian hospitality firms over a time frame of 2001-15. Variables including firm quality measured through Altman Z score, leverage, size, profitability, tangibility, growth, liquidity along with macro variables of growth in gross domestic product and inflation are taken into consideration for examining their impact on firm value. An empirical study has been carried out through panel data techniques by applying pooled OLS, fixed effects and random effects models. The findings of the study reveal a significant relationship of firm value with firm quality, leverage, liquidity, size and economic growth. The study shows that Modigliani miller theorem of capital structure irrelevance does not hold for Indian hospitality sector. It is of practical significance for hotel owners to reassess their capital structure to improve firm quality and firm’s market performance.

Share and Cite:

Aggarwal, D. and Padhan, P. (2017) Impact of Capital Structure on Firm Value: Evidence from Indian Hospitality Industry. Theoretical Economics Letters, 7, 982-1000. doi: 10.4236/tel.2017.74067.

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