Author(s): Anupriya Krishna. DResearch Scholar, Department of CommerceGovernment College, AttingalUniversity of KeralaEmail: anupriyakrishnad92@gmail.comCMA(Dr) T. RajeshProfessor, Department of CommerceGovernment College, NedumangaduUniversity of KeralaEmail: rajeshvjd@reddifmail.com Kiran Toms
Research Scholar
Department of Commerce
Government College Attingal
University of Kerala
Email: kirantoms123@gmail.com
Article Dates: Received: 05 November 2025 | Revised Submission: 21 November 2025 | Accepted: 27 November 2025 | Available Online: 01 December 2025AbstractThis study investigates the effects of financial health on pharmaceutical firms 'capital structure, with financial stability as the primary variable. This research uses panel data from 50 pharmaceutical firms for ten years to analyze the influence of a firm’s financial health on its leverage as measured by the Debt-Equity Ratio, employing several econometric models: Random Effects and Fixed Effects. Pooled Ordinary Least Squares. The fixed-effects model emerged as the model appropriate to explain the nexus. The results showed that financial health had a highly unfavorable relationship with capital structure, such that companies with better financial well-being tend to avoid utilizing higher debt levels. Firm size, profitability, liquidity, return on assets, and interest coverage ratios have also been examined to explain the nexus comprehensively. The study’s findings underscore the importance of maintaining strong financial health in determining capital structure decisions, which is significant for both corporate management and investors. By maintaining financial stability, pharmaceutical companies can reduce their dependence on debt, thereby reducing financial risk and enhancing long-term sustainability.Keywords: ICR-Interest coverage ratio, ROA -Return on AssetsAnupriya Krishna. D, T. Rajesh, & Kiran Toms. (2025). Financial Health and Capital Structure Dynamics: An Empirical Study of Selected Pharmaceutical Firms. IJARSAI International Journal of Advanced Research Scientific Analysis & Inferences, 01(03), 197–214. https://doi.org/10.5281/zenodo.17788858