The main aim of this article is to examine the effect of working capital on profitability of Indian firms. We collected data about a sample of 263 non-financial BSE 500 firms listed at the Bombay Stock (BSE) from 2000 to 2008 and evaluated the data using OLS multiple regression. The findings of our study significantly depart from the various international studies conducted in different markets. The results reveal that working capital management and profitability is positively correlated in Indian companies. The study further reveals that inventory of number of days and number of days accounts payable are negatively correlated with a firm’s profitability, whereas number of days accounts receivables and cash conversion period exhibit a positive relationship with corporate profitability. The present study contributes to the existing literature by examining the effect of working capital management on profitability in the context of an emerging capital market such as India.

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This paper studies the impact of capital structure or financial leverage on firm financial performance. A sample size of 422 listed Indian manufacturing companies on Bombay Stock Exchange (BSE) has been taken to analyze the relationship between leverage and firm performance. A period of 10 years from 2003–2004 to 2012–2013 and annual financial standalone data have been considered to analyze the leverage effect. Ratio analysis and panel data approach have been applied to perform the empirical study. Return on asset, return on equity and Tobin’s Q are used as the proxy for measuring the firm’s financial performance. It was found that financial leverage has no impact on the firm’s financial performance parameters of return on asset and Tobin’s Q. However, it is negative and significantly correlated with return on equity. Other independent variables like size, age, tangibility, sales growth, asset turnover and ownership structure are significant determinants of a firm’s financial performance in the Indian manufacturing sector. Thus, the findings of the study would enhance the literature on capital structure and is relevant for the Indian manufacturing industry in taking its capital structure decisions as it is based on the most recent data and covers the period of both pre- and post-recession of 2008–2009. There is an adverse effect of recession on the financial performance of the Indian manufacturing firms.

Considering the endorsement of Indian Companies Act (2013), the study examines the role of audit committee characteristics (independence and frequency of meetings) in addition with other components of corporate governance (duality, promoter shareholding, board composition, and board size) in improving firm performance. Fixed effect panel data regression was applied on 235 non-financial public limited companies listed in NSE 500. The time period considered was ten years (2004 to 2013). Return on Assets, Return on Equity, Tobin's q and Market Capitalization were used as proxy of firm performance. Results reveal significant positive association of board size and CEO-Chairman dual role with firm performance. However, findings did not reveal any additional effect of audit committee independence and its meeting frequency on the financial performance of Indian firms. Regulators and policy makers may reexamine the significance of greater independence of board and audit committee in context of firm performance.

Purpose – The purpose of this paper is to study the key determinants of capital structure for Indian manufacturing firms and which theory implications, i.e. trade off vs pecking order are more applicable in current Indian manufacturing sector scenario. Design/methodology/approach – A sample size of 422 listed Indian manufacturing companies on Bombay Stock Exchange has been considered to do the empirical evaluation. A ten year period from 2003-2004 to 2012-2013 and annual financial standalone data have been considered for study. Ratio analysis and panel data approach have been applied to perform the empirical evaluation. Total debt to total capital and total debt to total assets are used as the proxy for firm financial leverage. Findings – It was empirically found that size, age, asset tangibility, growth, profitability, non-debt tax shield, business risk, uniqueness and ownership structure are significantly correlated with the firm financial leverage or key determinants of capital structure in Indian manufacturing sector. Also, other variables like dividend payout, liquidity, interest coverage ratio, cash flow coverage ratio (CFCR), India inflation and GDP growth rate are empirically found to be insignificant to determine the capital structure of Indian manufacturing sector. There is no single theory implications, i.e. trade off vs pecking order which can explain the capital structure nature of Indian manufacturing sector and rather it is a mix of both the theories. Originality/value – The findings of the study would enhance the literature on capital structure and is significant for the Indian manufacturing firm’s decisions as it includes the most recent data and covers the period of both pre- and post-recession of 2008-2009.