International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

A Widely Indexed Open Access Peer Reviewed Multidisciplinary Bi-monthly Scholarly International Journal

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Two-Dimensional Firm Performance Measure and Leverage: A Study among Indian Companies

Author(s) Dr. ELDHOSE K.V., LERIL JAMES
Country India
Abstract The contradicting nature of the capital structure theories and the findings of the different empirical studies always confused the practicing managers about the debt equity mix and its influence on firm performance and the resultant firm value. While the capital structure theories are criticised for their inferior assumptions, the empirical studies further fuelled the context by bringing out diverse relationship existing between leverage and their influence on firm value. In this context, this study examines the relationship between financial leverage and firm performance of Indian manufacturing companies controlling for the effect of tangibility, liquidity, asset turnover and size of the firm. The study made use of 1960 annual data points over a period of 14 years to form a panel of 140 Indian manufacturing companies listed in the NSE. Though negative relationship between leverage and firm performance measured by ROE is confirmed in the study, no such relationship was found between leverage and firm performance when the proxy for the firm performance was Tobin’s Q. The findings of the study are deadly opposite to the findings of many of the previous studies in the Indian context though it keeps in line with the findings of some of the past studies.
Keywords Financial leverage, Firm performance, Indian manufacturing sector, Panel data, Return on equity, Tobin’s Q
Field Sociology > Banking / Finance
Published In Volume 7, Issue 5, September-October 2025
Published On 2025-10-18
DOI https://doi.org/10.36948/ijfmr.2025.v07i05.58114
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E-ISSN 2582-2160
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