HOW DO INTEREST RATE CHANGES INFLUENCE CAPITAL STRUCTURE DECISIONS AMONG SMES IN THE TECHNOLOGY SECTOR IN THE INDIAN ECONOMY?
DOI:
https://doi.org/10.53555/eijbms.v10i1.169Keywords:
Interest rates, capital structure, SMEs, trade-off theory, financial risk, cash flow management, debt-equity financing, tech industryAbstract
The purpose of this study is to determine the impact of interest rate changes on the capital structure decisions of the SMEs in the Indian technology sector. SMEs play a crucial role in the India as they help in creating employment opportunities, innovations and creating value to the economy. However, the sources of funds that include debts as well as equities are very much vulnerable to macros especially the interest rates. This paper also looks at the theoretical frameworks such as the trade-off theory of capital structure and internal factors such as firm size, profitability, and managerial characteristics and external factors such as technological advancement and market fluctuations. It also defines the way of changes in rates of interest on the funding cost for SMEs, cash flow, credit customer or debts. Other factors that are also referred to as names include the government policy and cost of capital as among the major factors that affect the capital structure of SME’s. In this way, the research offers an insight into the financial risk management and capital structure of the Indian tech SMEs in a volatile environment.
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