Vol. 7, Issue 2, Part M (2025)

This paper presents a comprehensive survey of corporate capital structure practices among Indian firms, synthesizing empirical findings from emerging market literature. The evidence overwhelmingly supports a hybrid model of financing where both the Pecking Order Theory (POT) and the Static Trade-off Theory (STT) are simultaneously relevant, though the predictive strength often favors the managerial hierarchy stipulated by POT. The most robust empirical finding is the negative relationship between firm profitability and leverage, confirming the preference for internal funds. While STT is supported by the positive influence of asset tangibility and size on borrowing capacity, financing capacity is critically constrained by institutional factors, notably a dominant bank-centric financial system and specific regulatory tax provisions, such as the 30% EBITDA restriction on interest deduction for related-party debt. Furthermore, capital structure decisions are highly sector-specific and are increasingly influenced by macroeconomic variables like net Foreign Direct Investment (FDI), which acts as a deleveraging substitute for domestic debt. The findings underscore the necessity of a nuanced, sector-specific approach to financial policy in this rapidly evolving economy.