Author(s): Ramandeep Kaur
The main aim of this research study is to examine the impact of financial leverage on profitability of 21 recapitalized Public Sector Banks (PSBs) in India over the period 2008 to 2017. The data collected from the annual reports and report of the controller and auditor general of India on recapitalization of Public Sector Banks (PSBs) has been tested using random effects and fixed effects assessment approaches. The findings reveal that leverage exerts a significant negative effect on PSBs profitability. This also provides empirical support to the pecking order theory. The outcomes of the study further establish that bank size positively and significantly enhances profitability. Thus, the findings reveal that financial leverage is not favorable to PSBs profit growth in India.