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Determinants of Debt Financing and Their Moderating Role to Leverage-Performance Relation: An Emerging Market Review

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Listed:
  • Muhammad Ali Jibran Qamar
  • Umar Farooq
  • Hamayun Afzal
  • Waheed Akhtar

Abstract

This study explored the determinants of debt financing and their moderating role to the leverage-performance relation in case of 304 Pakistani Nonfinancial firms listed with the Pakistan Stock Exchange. Results revealed that larger, high liquid and more tangible firms deployed least debt ratio on average, while less liquid and less tangible firms did conversely. It is also found that more debt borrowing by less liquid firms and less borrowings by larger and more liquid firms is not favourable decision and managers need to revise their financing policy. The results also suggested that debt borrowings least affect firms¡¯ profits for larger, high liquid, less tangible and high growth oriented firms. Hence, this research provides practical solutions for financial managers by exploring if managers are following right mix of securities and when debt borrowings is a most favourable option of financing.

Suggested Citation

  • Muhammad Ali Jibran Qamar & Umar Farooq & Hamayun Afzal & Waheed Akhtar, 2016. "Determinants of Debt Financing and Their Moderating Role to Leverage-Performance Relation: An Emerging Market Review," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 300-311, May.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:5:p:300-311
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    Cited by:

    1. Razali Haron, 2018. "Firm Level, Ownership Concentration and Industry Level Determinants of Capital Structure in an Emerging Market: Indonesia Evidence," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 14(1), pages 127-151.
    2. Maya Sari, 2019. "Firm Size as Moderator to Capital Structure-Its Determinants Relations," GATR Journals jfbr163, Global Academy of Training and Research (GATR) Enterprise.
    3. Maren Forier & Nadine Lybaert & Maarten Corten & Niels Appermont & Tensie Steijvers, 2023. "The flip side of the coin: how entrepreneurship-oriented insolvency laws can complicate access to debt financing for growth firms," European Journal of Law and Economics, Springer, vol. 56(3), pages 461-495, December.

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    More about this item

    Keywords

    debt financing; moderation; leverage; financial performance;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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