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Journal of Finance & Economics Research - Volume 5, Issue 1 2020
By Sarada Dakua
10.20547/jfer2005104
Keywords: Capital structure, Indian steel industry, relevance, finance.
India being the top exporter of iron ores has the potential to be counted as one of the top exporters of steel if the steel companies follow optimal capital structure. On the contrary, there has been a history of financial issues such over/under-leverage in this sector for which the companies have not been able to perform as per their potential. Since neither India is a developed country nor its steel companies are financially self-sufficient, they are bound to depend on the external capital resulting the decision to be taken on the leverage ratio as even more crucial. Thus it is trivial to investigate the leverage ratio in order to decide the optimal capital structure. However, the first and foremost step is to test if the capital structure of Indian steel industry is relevant to Indian steel companies’ values, which is the objective of this study. It is found that capital structure has little significance to Indian steel companies’ firm values.