Research Paper
Year: 2020 | Month: March | Volume: 7 | Issue: 3 | Pages: 95-101
Debt Overhang: Indian Real Estate Companies’ Dilemma
Nilotpal Mukherjee1, Arindam Das2
1Research Scholar, 2Professor,
Department of Commerce, the University Of Burdwan
Corresponding Author: Nilotpal Mukherjee
ABSTRACT
Debt overhang is a position of capital structure where excessive debt are reducing investments since the earnings from future prospective investment in firms goes to present debt holders and not the shareholders . Indian real estate companies have accumulated huge debt since the middle of the last decade and even before worldwide recession from 2008. The main focus of our study is to expose the evidence of debt overhang empirically of select real estate companies in India during 2004-2005 to 2016-2017.For this empirical study, we have taken a random sample of 20 Indian real estate companies and applied the technique of panel regression to evaluate the impact of debt linked variables on investment and thereafter conducted granger causality test to find out the causal relationship. The results show significant negative impact of debt maturity, financial leverage and coverage on investment of the selected companies as well as unidirectional causal relationships of debt maturity, leverage and default with investment. The study explores the existence of debt overhang both in long and short term.
Keywords: Capital structure. Debt overhang, Investment. Panel regression JEL Classification Codes: G32, G31, C23, E32
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