Financial Structure and Asset Utilization as Determinants of Corporate Performance: A Panel Data Analysis of Indian Listed Automobile Companies

Abstract

Financial structure and asset utilisation are crucial determinant of corporate performance and needs to be given considerable attention. Empirical evidence from these emerging economies remains inconclusive. This study seeks to examine the impact of financial structure and asset utilization on the corporate performance of Indian listed automobile companies. Debt Ratio, Equity Ratio and Financial Leverage represent financial structure of the company. Asset Turnover measures asset utilization. Return on Assets (ROA), Return on Equity (ROE), Return on Capital Employed (ROCE) and Net Profit Margin (NPM) are used as a performance evaluation tool. The study utilizes panel data comprising 80 firm-year observations from eight Indian listed automobile companies, covering the financial year 2017-2026. Descriptive statistics, Pearson correlation analysis, Variance Inflation Factor and panel data regression techniques including Fixed Effects and Random Effects models, are used to analyse the data. Hausman specification test is used to determine the appropriate estimation model. The findings indicate that asset utilization is the most consistent determinant of corporate performance, exhibiting a positive and statistically significant influence on Return on Equity and Return on Capital Employed. Financial structure variables, including Debt Ratio, Equity Ratio and Financial Leverage, do not exhibit statistically significant effects concluding corporate performance is highly influenced by asset utilisation rather than financial structure. This study contributes to the literature on corporate finance and management by presenting panel data evidence on the joint impact of financial structure and asset utilization on corporate performance within the automobile industry in India.