A GOAL PROGRAMMING APPROACH TO THE STUDY OF OPTIMAL CAPITAL STRUCTURE IN THE CONTEXT OF INDIAN CORPORATE FIRMS

The capital structure controversy debate is still to die down even after five decades of its birth from the seminal work by Modigliani and Miller in 1958. The irrelevance theorem was proved wrong by many later day theorists/empiricists but many postulated it otherwise. The existence of an optimal capital structure in the corporate sector has been debated extensively and non-conclusively too. The present study has been conducted to check the possible existence of an optimal capital structure in the Indian corporate sector. Besides other descriptive statistical techniques, the linear goal programming technique has been used to study whether the optimality objective is achieved by the thirty companies selected from private, public and IT sectors. The goal programming results show the non-existence of something called an optimal capital structure and instead corporate firms are inclined towards achieving multiple objectives/goals at a time and hence not optimizing rather satisfying level of achievement at multiple ends is the goal in the present globalised era of fierce competitions.