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Impact of Capital Structure on Shareholder's Wealth

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  • Tak, Alina

Abstract

An appropriate capital structure is a critical decision for any business organization to be taken for maximization of shareholders wealth and sustained growth. The main objectives of this study were to examine the determinants of capital structure and its impact on the shareholder’s wealth in cement sector of Pakistan. Thus, the major focus of this study was to investigate empirically firm specific factors such as independent variables firm size, leverage, asset growth and profitability (ROE) and dependent variable share price has an impact on cement companies in Pakistan’s cement industry. To achieve the research objectives documentation analysis was used. In this study, the researcher used only secondary data. All cement companies listed in Karachi stock exchange were included in the sample frame. Document review has been used for collecting data from annual reports. The results provide strong evidence in support of the theory’s of capital structure which asserts that share price was a significant determinant of maximizing shareholder’s wealth. From the findings the researcher recommended that the sample of cement industry use more equity than debt in financing their business activities, this because if the value of business can be enhanced with debt capital, it is dangerous for the firm.

Suggested Citation

  • Tak, Alina, 2016. "Impact of Capital Structure on Shareholder's Wealth," MPRA Paper 116421, University Library of Munich, Germany, revised 13 Oct 2022.
    • Handle: RePEc:pra:mprapa:116421
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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