Effect of Change in Capital Structure on Firms' Financial Performance: A Study on Select Cement Companies in India

Abstract: Indian Cement Industry is the second largest in the world, just after China. The 98% of the total production in India is consumed by the private sector. As per the market research, the market size is expected to reach over 4800 tons by 2028. The huge demand, due to various use of cement, has caused 12.1% increase in the production from September 2021 to September 2022. Furthermore, expected CAGR shall shoot up to 5% approximately during the period of 2023 to 2028. Therefore, it is necessary to examine the firm’s financial performance. This paper tries to measure the financial performance, considering Earning per Share (EPS) and how it is affected by the change in the capital composition of the firm. Debt-Equity Ratio (DER), and Debt Ratio (DR) are taken as the indicator of capital structure. In order to conduct the examination, five years financial data of seven largest cement companies, based on their market capitalisation, are considered. From the result it is observed that the Debt Ratio negatively impacts Earning per share. Keywords: Debt-Equity Ratio, Debt Ratio, Earning per share JEL Classification Number: G11, G31, G32