Published Online:July 2026
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP010726
DOI:10.71329/IUPJARAP/2026.25.3.6-23
Author Name:Narasing Seetaram Devi and A S Shiralashetti
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:6-23
The study examines the impact of leverage across sectors that account for a major chunk of the Nifty 100. For this purpose, five sectors that make up a significant portion of the Nifty 100 were chosen, and 10 companies from each sector were selected based on their market capitalization. The final sample comprises 600 observations of 50 companies observed over 12 years from 2014 to 2025. To evaluate the leverage-performance association, panel regression models with sectoral interaction dummies have been used. The study finds that leverage adversely affects performance in general, and its adverse effect varies across sectors, thus emphasizing the importance of sectoral characteristics in leverage-performance association and the need for sector-specific capital structure decisions. However, the question—Why does leverage have such an uneven impact across sectors?—is not supported by any empirical evidence in this study.
The connection between a company’s performance and its leverage has been a topic of discussion (Omri et al., 2024). Determining the optimal capital structure and assessing its influence on the company’s performance has become a crucial issue in corporate finance (Nikhil et al., 2024). There is not a single widely recognized theory for finding out the best balance between debt and equity in a company’s capital structure (Arhinful & Radmehr, 2023).