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.