Advanced Search
MyIDEAS: Login

Growth and Financing Behaviour of Firms of Textile Industry in Pakistan: A Panel Data Analysis


Author Info

  • Ijaz Hussain

    (School of Social Sciences, Beaconhouse National University, Lahore)

Registered author(s):


    High economic growth, extremely low nominal interest rate and negative real interest rate gave a boost to financial leverage (gearing ratio) of the textile sector to its peak in 2005. Firms are now are facing the consequence of high gearing. An explosion in their financing costs along with removal of textile quota from 2005 onwards and later on an acute energy crisis hampered their profitability and ability to repay their debt. This in turn contributed to non-performing loans which is now is likely to pose a big challenge for financial sector and push economy into another crisis. Most of the previous studies including a very few on capital structure of Pakistani firms focus on understanding only the firm specific determinants of financial leverage and completely ignore macroeconomic or institutional factors. Findings of this paper prove that all firm specific determinants including profitability and efficiency, firms‘ growth, risk and collateral excluding size significantly influence corporate financial leverage of textile industry in Pakistan. All macroeconomic variables including overall economic growth, equity market conditions and nominal cost of debt also have significant impact on corporate gearing. Negative sign with the composite measure of profitability and efficiency implies that banks are compelled to fund inefficient and unprofitable firms because demand for loans comes more from inefficient and unprofitable firms. Positive sign with growth and negative sign with risk is indicative of the fact that banks prefer to lend to growing rather than riskier firms.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: Access to the full text is restricted. Please contact our publication Division for full article Email: Phone: +92-51-9248089

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

    Volume (Year): 50 (2011)
    Issue (Month): 4 ()
    Pages: 699-714

    as in new window
    Handle: RePEc:pid:journl:v:50:y:2011:i:4:p:699-714

    Contact details of provider:
    Postal: P.O.Box 1091, Islamabad-44000
    Phone: (92)(51)9248051
    Fax: (92)(51)9248065
    Web page:
    More information through EDIRC

    Related research

    Keywords: Capital Structure Determinants; Corporate Financial Leverage; Corporate Gearing Ratio;

    Find related papers by JEL classification:


    No references listed on IDEAS
    You can help add them by filling out this form.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Chhapra, Imran Umer & Asim, Muhammad, 2012. "Determinants of capital structuring: an empirical study of growth and financing behavior of firms of textile sector in Pakistan," MPRA Paper 51068, University Library of Munich, Germany.


    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:50:y:2011:i:4:p:699-714. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Khurram Iqbal).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.