Author(s): Naliniprava Tripathy
This study investigates the long run and short-run relationship between capital structure determinants and stock return of manufacturing firms of India Autoregressive Distributed Lag (ARDL) and Generalized Method of Moments (GMM) model. ARDL bound test findings witness a healthy link amid capital structure determinants and stock returns. The GMM model also finds an optimistic relationship amid eps, tangibility, and stock return while adverse relation found among total debt, p/e ratio, and stock return. The result of the study presents that capital structure determinants play a vital role in elucidating stock returns of the firms. The results have substantial inferences at the firm, investors, and policymakers’ levels. Investors must think over the impact of capital structure determinants on stock return before making investment decisions. Corporate managers should minimize the financial leverage to enhance stock return and performance of the company. Precisely, the results of this study add to the knowledge of the influential behavior of Capital structure determinants on the stock return of Indian manufacturing firms of India.