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Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange

Author

Listed:
  • Hafiz Abdur Rashid

    (PhD Scholar, Superior College, Lahore, Punjab, Pakistan.)

  • Ahmed Raza Bilal

    (Associate Professor, Department of Business & Management Sciences, Superior College, Lahore, Punjab, Pakistan.)

Abstract

This paper looks at financial performance of non-financial sectors of Pakistan concerning capital structure. We gathered data from annual audited financial statements of 152 firms listed at PSX during 2010-2017. To analyze data gathered, we have employed descriptive, correlation and regression analyses techniques. The findings show substantial positive contribution of LTDA in EPS and ROA and significant negative role in NPM and ROE which implies prefer long term debt over short term debt because of less financing cost. STDTA has substantial negative contribution in firms financial performance among all sectors except sugar and communication & technology sectors. TDTA also has negative impact on financial performance of firms among all sectors except automobile sector, which implies that equity financing is preferable over debt financing. These findings validate pecking order theory and recommend preferring internal financing (retained earnings) over external financing.

Suggested Citation

  • Hafiz Abdur Rashid & Ahmed Raza Bilal, 2020. "Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange," Global Economics Review, Humanity Only, vol. 5(2), pages 1-16, June.
    • Handle: RePEc:aaw:journl:v:5:y:2020:i:2:p:1-16
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    References listed on IDEAS

    as
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    4. Mohammad Rajon Meah & Nasir Uddin Chaudhory & Md. Ibrahim Khalil, 2020. "Does Capital Structure Affect the Profitability of Listed Family and Non-Family Firms? Evidence from Bangladesh," International Journal of Business, Economics and Management, Conscientia Beam, vol. 7(3), pages 131-145.
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    More about this item

    Keywords

    Capital Structure; Financial Performance; Non-Financial Sector;
    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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