An Enquiry into Effect of Capital Structure on Firm Value:A Study of Power Sector Companies in India

This empirical study is an effort to the existing field of effect of capital structure decisions on firm value. The investigation is made on eleven power companies selected from the ‘BSE Power’ from Capitaline database for the period 2007-2015. The firm value is proxied by Tobin’s Q and the Enterprise value to profit before interest, depreciation and taxes ratio. The leverage is measured using debt-equity ratio. Panel data regression model is employed for analysis which supports the view that there is a negative influence of financial leverage on firm value (measured using Tobin’s Q). However, the other measure is not significantly impacted by the extent of debt in the capital structure.