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<p>We investigate the impact of financial performance and firm characteristics on leverage by using panel data from 77 FMCG corporations included in the BSE Index spanning twelve years (2012–2023). The firm characteristics and performance are measured by Liquidity, Profitability, Tangibility, Effective Tax Rate, and Sales Growth whereas short-term debt ratio (SDR), long-term debt ratio (LDR) and total debt ratio (TDR) represent leverage. For the empirical investigation, we employ static panel data regression to analyse the association among leverage, firm characteristics, and performance. The findings indicate that firm age, size, tangibility, and liquidity exert a substantial adverse effect on SDR. When considering LDR, firm size demonstrates significant negative effects, and tangibility and growth exhibit significant positive effects. For TDR, effective tax rate, firm size, liquidity, and tangibility have significant negative effects. The study predominantly aligns with the pecking order framework, emphasizing firms’ inclination toward internal funding rather than debt due to imbalances in information availability. Understanding these trends enables Indian FMCG firms to make informed financing decisions and improve competitiveness and sustainability in the market.</p>

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Is Financial Leverage Influenced by the Financial Performance and Firm Characteristics in the FMCG Sector in India?

  • 期刊论文

  • 发表日期：

    2025年2月15日

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  • Priyanka Singh,
  • Ruchika Gahlot,
  • Miklesh Prasad Yadav,
  • Rajbir Singh

摘要

We investigate the impact of financial performance and firm characteristics on leverage by using panel data from 77 FMCG corporations included in the BSE Index spanning twelve years (2012–2023). The firm characteristics and performance are measured by Liquidity, Profitability, Tangibility, Effective Tax Rate, and Sales Growth whereas short-term debt ratio (SDR), long-term debt ratio (LDR) and total debt ratio (TDR) represent leverage. For the empirical investigation, we employ static panel data regression to analyse the association among leverage, firm characteristics, and performance. The findings indicate that firm age, size, tangibility, and liquidity exert a substantial adverse effect on SDR. When considering LDR, firm size demonstrates significant negative effects, and tangibility and growth exhibit significant positive effects. For TDR, effective tax rate, firm size, liquidity, and tangibility have significant negative effects. The study predominantly aligns with the pecking order framework, emphasizing firms’ inclination toward internal funding rather than debt due to imbalances in information availability. Understanding these trends enables Indian FMCG firms to make informed financing decisions and improve competitiveness and sustainability in the market.