Abstract : Financial risk and capital structure can have a great impact on a company's future. In a highly competitive and innovative market such as the pharmaceutical market in India, there will be many companies competing for limited space. Each company needs to find an optimal level of financial risk when it comes to their capital financing strategy. An optimal level of financial risk would allow the company to grow financially at an acceptable rate while being able to operate with maximum efficiency. Financial risk is one indicator of a company's capital financing strategy. It is typically measured by the proportion of debt that is part of the total amount of funds used to finance operations (the capital structure). Financial risk has direct implications on a company's profitability, its ability to meet short term obligations (liquidity), and the value shareholders receive from the company. A manager, investor or policymaker would want to know the relationships between financial risk and a company's capital financing strategy. Therefore, this study will attempt to measure the relationship between financial risk and the capital financing strategy of pharmaceutical firms operating in India. Specifically, this research examines how various levels of financial leverage affect the way firms use their available funding sources and subsequently effect their overall financial performance. Statistical analysis based on secondary data for select Indian pharmaceutical companies will be conducted using various financial ratios to determine the strength of the associations among the indicators of financial risk and the components of capital financing strategies. The results of this research should give insight into the financial strategies employed by pharmaceutical companies to achieve an optimal balance between managing risk associated with debt usage and achieving favorable financing outcomes. As well, the results could help financial managers design appropriate capital structure policies for their companies and assist investors understand the risk/return tradeoffs prevalent within the pharmaceutical industry. Finally, the results of this study will contribute to the existing body of knowledge regarding the methods utilized by firms to manage financial risk by providing empirical evidence on the financial risk management practices occurring within India's rapidly expanding pharmaceutical industry.
Keywords : Financial Risk, Capital Structure, Pharmaceutical Firms, Debt–Equity Ratio, Financial Leverage, Corporate Finance, Indian Pharmaceutical Industry.
Cite : Joshi, A. B. (2026). Assessing The Relationship Between Financial Risk & Capital Structure Of Indian Pharmaceutical Firms (1st ed., pp. 11-19). Noble Science Press. https://noblesciencepress.org/chapter/nspebeparddias2026ch-02
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