Capital structure decision and survival of firms: A dividend approach

Abstract

Capital structure decisions create a lot of challenges to the firms. One of the most important strategic decisions is to reach an integral mix of debt and equity, in-order to form an optimal capital structure. However the debt and the equity have a huge impact on the survival of the firm. The present literature provides a positive relation between the capital structure and the survival of the firm. The paper examines this association in an Indian context using a sample size of 50 companies in the manufacturing sector. The dividend of the firms is considered as the determinant for the survival of the firms. The results show that there is no relationship between the capital structure and the survival of the firms. There might be other factors which affect the capital structure of the firms.