Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Leverage strategies of Indian telecom sector: a dynamic panel data approach

Leverage strategies of Indian telecom sector: a dynamic panel data approach The purpose of this paper is to examine the optimal leverage ratio, speed of adjustment, and which factors contribute to achieving the target of selected telecom companies in a partial adjustment framework from 2008 to 2017. Further is to analyze the likelihood of bankruptcy of sample companies by Altman Z-Score model and to suggest which theory of capitals structure is better in explaining leverage strategies and judicious mix of debt and equity structure of the selected telecom companies.Design/methodology/approachThis paper chooses a partial adjustment model and uses the generalized method of moments technique to identify the variables that influence the target leverage ratio and the factors that influence the speed at which the target leverage is adjusted. Second, the Altman Z-score model is used in this paper to research the financial status of telecom companies using financial instruments and techniques.FindingsFor Indian telecom firms, firm-specific variables such as profitability, NDTS and Z-score lead to greater debt adjustment towards optimal level target leverage. The paper also highlights new paradigms in the Indian telecom sector, stating that top market leaders such as Bharti Airtel, BSNL, Idea, Vodafone and R.com, among others, should focus on debt reduction and interest payments, as well as implement new strategies to solve the crisis and change financial policies.Research limitations/implicationsIt mainly focuses on firm-specific variables because the firm-specific variables affect the leverage framework. The country-specific variables are not taken into the study. These results may be unique to telecom companies due to some peculiarities existing in the telecom sector in India. Although other sectors, both national and international level, can be taken into consideration.Practical implicationsThis paper has ramifications for corporate executives, investors and policymakers in India, for example, in terms of considering different transition costs while changing a telecom company’s financing decisions.Originality/valueTo the best of the authors’ knowledge, this is the first paper of its kind to look at both financial and econometric tools to assess financial performance using the Altman Z-Score model, as well as decide leverage strategies and the pace with which they can be adjusted to target leverage in the context of Indian telecom companies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

Leverage strategies of Indian telecom sector: a dynamic panel data approach

Loading next page...
 
/lp/emerald-publishing/leverage-strategies-of-indian-telecom-sector-a-dynamic-panel-data-txcJv7GpHk
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1753-8254
eISSN
1753-8254
DOI
10.1108/igdr-03-2021-0045
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to examine the optimal leverage ratio, speed of adjustment, and which factors contribute to achieving the target of selected telecom companies in a partial adjustment framework from 2008 to 2017. Further is to analyze the likelihood of bankruptcy of sample companies by Altman Z-Score model and to suggest which theory of capitals structure is better in explaining leverage strategies and judicious mix of debt and equity structure of the selected telecom companies.Design/methodology/approachThis paper chooses a partial adjustment model and uses the generalized method of moments technique to identify the variables that influence the target leverage ratio and the factors that influence the speed at which the target leverage is adjusted. Second, the Altman Z-score model is used in this paper to research the financial status of telecom companies using financial instruments and techniques.FindingsFor Indian telecom firms, firm-specific variables such as profitability, NDTS and Z-score lead to greater debt adjustment towards optimal level target leverage. The paper also highlights new paradigms in the Indian telecom sector, stating that top market leaders such as Bharti Airtel, BSNL, Idea, Vodafone and R.com, among others, should focus on debt reduction and interest payments, as well as implement new strategies to solve the crisis and change financial policies.Research limitations/implicationsIt mainly focuses on firm-specific variables because the firm-specific variables affect the leverage framework. The country-specific variables are not taken into the study. These results may be unique to telecom companies due to some peculiarities existing in the telecom sector in India. Although other sectors, both national and international level, can be taken into consideration.Practical implicationsThis paper has ramifications for corporate executives, investors and policymakers in India, for example, in terms of considering different transition costs while changing a telecom company’s financing decisions.Originality/valueTo the best of the authors’ knowledge, this is the first paper of its kind to look at both financial and econometric tools to assess financial performance using the Altman Z-Score model, as well as decide leverage strategies and the pace with which they can be adjusted to target leverage in the context of Indian telecom companies.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Mar 14, 2022

Keywords: Capital structure; Leverage strategies; Telecom companies; Dynamic panel

References