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The Consequences of Easy Credit Policy, High Gearing, and Firms’ Profitability in Pakistan’s Textile Sector: A Panel Data Analysis

Author

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  • Ijaz Hussain

    (School of Social Sciences, Beaconhouse National University (BNU), Lahore, Pakistan.)

Abstract

This study uses panel data on 75 textile firms for the period 2000–09 to examine the consequences of an easy credit policy followed by high gearing, increased financing costs, and other determinants of corporate profitability. Five out of nine explanatory variables—including gearing, financing costs, inflation, tax provisions, and the industry’s capacity utilization ratio—have a negative impact, while the remaining four variables—working capital management, asset turnover, exports, competitiveness, and devaluation—have a positive impact on firms’ profitability.

Suggested Citation

  • Ijaz Hussain, 2012. "The Consequences of Easy Credit Policy, High Gearing, and Firms’ Profitability in Pakistan’s Textile Sector: A Panel Data Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 17(1), pages 33-44, Jan-June.
  • Handle: RePEc:lje:journl:v:17:y:2012:i:1:p:33-44
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    References listed on IDEAS

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    More about this item

    Keywords

    Easy credit; energy crisis; corporate profitability; textile sector; panel data; Pakistan.;
    All these keywords.

    JEL classification:

    • L78 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Government Policy
    • L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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