CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE: A COMPARATIVE REVIEW OF CEMENT AND STEEL INDUSTRIES IN NORTH EASTERN INDIA

Abstract

The paper will provide a comparative evaluation of capital structure and financial performance of cement and steel sector in the North Eastern part of India. According to the theoretical interpretation of the strategic value of capital structure decisions in capital-intensive industries, the research can enable the synthesis of the theoretical framework and the actual findings in an attempt to establish the linkage between leverage and the funding mix and liquidity decision-making and the profitability of the firms, operating efficiency, and risk exposure in the two industries. The review will include published evidence, territorial characteristics of the industry, and an explanatory empirical analysis, based on secondary financial ratios of average companies and average period. It has been found that the two industries are both capital intensives and sensitive to the interest-rate cycles although the cement industry in the North East relies on long term debts to a greater extent than variable but consistent operating margin due to the localized advantages of their resources. The steel companies on the other hand lead to increased earnings volatility and an increased sensitivity of profitability to both short-term leverage and working capital management. The paper clarifies policy and management implication of financing a company, reasoning policy challenges and research agenda of an industrial-level policy that would be appropriate in regard to rigorous empirical testing using firm level panel data.