Nature of a Company\'s Asset

¶ … NATURE OF a COMPANY'S ASSET BASE (TANGIBLE OR INTANGIBLE) AFFECT CAPITAL STRUCTURE CHOICES: AN EXAMPLE USING INDIA DATA

The purpose of this paper is to investigate whether the nature of a company's asset base (tangible or intangible) affects the capital structure policies of that company. This will be done using company data and information from India, and through interviews examining the choice of capital structure and the role of asset tangibility from the perspective of those who actually operate these companies.

The study employs qualitative data in examining the nature of a company's asset base and whether it affects the capital structure choices. This is a personal choice of the people who operate the company, and the 'why' of what they do is generally considered to be more important than the fact that they do it. The 'why' is very important, because it shows the rationale behind the correlation between capital structure choices and the nature of a company's assets.

The results of this study indicate that the tangibility in the manufacturing sector is different from the tangibility in the services sector, and this determines some of the relationship between the variables. While the sample is not large, it is reasonable to assume that, had the sample been larger, the conclusions would have been similar. However, because of the limited number of companies interviewed, it is not possible to expand the data to definitively say that all companies handle their capital structure decisions and asset bases this way. The main value of this paper is to identify whether the company's asset base affects the capital structure decisions, and determine what criteria are used to make the determination of what capital structure the company selects.

Keywords -- Capital Structure, Asset Tangibility

Paper type -- Dissertation - Descriptive Analysis

Table of Contents

Introduction

Background of the Research

Problem Definition and Objective

Motivation for the Study

Outline for the Dissertation

Literature Review

Introduction to Capital Structure

Indian Capital Structure

Debt and Money Markets in India