Impact of Capital Structure on Financial Performance and Firm Value of Automobile Companies in India

Manoj B; Karanam Kavitha

Impact of Capital Structure on Financial Performance and Firm Value of Automobile Companies in India

Author(s)	Mr. Manoj B, Dr. Karanam Kavitha
Country	India
Abstract	This study examines the relationship between capital structure, financial performance and firm value among Indian automobile companies. Using 430 company-year observations from the supplied secondary financial dataset, the study represents capital structure through the debt-to-equity ratio (DER), financial performance through return on assets (ROA), return on equity (ROE) and net profit margin (NPM), and firm value through Tobin's Q and market capitalization. Descriptive statistics, Pearson correlation and simple linear regression are employed at the 5% significance level. The evidence shows a statistically significant negative association between DER and ROA (r = −0.451, p < .001; R² = 0.204) and between DER and Tobin's Q (r = −0.267, p < .001; R² = 0.071). The DER–ROE relationship is negative but statistically insignificant (r = −0.065, p = .181), while DER is also not significantly related to market capitalization (r = 0.044, p = .364). A supplementary analysis using debt ratio and NPM reports a significant negative relationship (r = −0.437, p < .001; R² = 0.191). Taken together, the results indicate that the association between leverage and corporate outcomes depends on the performance or valuation measure used. The findings are discussed in relation to capital-structure perspectives and evidence reported in the supplied literature.
Keywords	capital structure; debt-to-equity ratio; financial performance; firm value; automobile industry; return on assets; return on equity; Tobin's Q; market capitalization.
Field	Business Administration
Published In	Volume 8, Issue 5, September-October 2026
Published On	2026-10-03

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Impact of Capital Structure on Financial Performance and Firm Value of Automobile Companies in India

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