Industry dynamics and capital structure choice: Evidence from Indian manufacturing firms

We explicitly analyze the influence of industry-level attributes on a firm's capital structure choice, unlike other studies that have only used an "industry dummy" to depict industry effects on firm-level choices. An unbalanced panel of 503 firms from four major Indian manufacturing industries is considered for the period 2001-2017. A rise in industry munificence incentivizes firms to decrease their external financing. At the same time, firms in a relatively concentrated industry with higher growth opportunities increase their reliance on borrowings. A highly munificent environment and a lower risk of default incentivize firms to borrow more.