Relationship Between Corporate Financial Structure and Firm Value of Selected Companies in Tamil Nadu

From canonical correlation analysis identifying the combined effect of financial structure variables along with firm characteristics on composite of firm values by MVA and Tobin’s Q, it is concluded that the firm value tend to increase with high EPS, ROE when the use of debt fund in capital is less while liquidity is visibly higher in the case of automobile companies. A substantial increase in EPS and CR level and negligible increase in net sales to total assets tend to positively influence market valuation of sugar companies only relative to replacement cost. The shares of cement companies are valued less than its book value if use of debt fund in the capital is more when there has been a decline in asset level even if there has been an increase in turnover and profitability. Shares of chemical companies tend to be valued less than book value as well as relative to replacement cost if there has been a considerable decline in short-term debt fund while there has been a substantial increase in liquidity level and moderate increase in EPS while turnover declines marginally. Regarding pharmaceutical company, the valuation of shares is independent of the financial structure rather it is directly affected by the EPS, PM and DPS (profitability). For non-banking finance sector there corporate financial structure has positive influence on firm value.