Determinants of capital structuring: an empirical study of growth and financing behavior of firms of textile sector in Pakistan
Purpose- Purpose of this study is to investigate the determinants of optimal capital structuring that affect growth and financing behavior of textile sector firms in Pakistan keeping in view the important role capital structuring plays in any firm's financial management decisions and the positive contribution it makes to the creation of firms' value and profitability. Methodology/sample- Size of the firm (capital), profitability, fixed assets structure and taxes were used as control variables to investigate the determinants of optimal capital structuring of textiles companies. A sample size of 90 textile companies across the country was selected and their data for the 2005 – 2010 periods was used. The determinants of optimal capital structure were examined using correlation and regression analyses. F-value was calculated to test the fitness of overall model. Findings- Results of the study showed a negative relationship between dependent variable financial leverage and independent variables. The statistical analysis of spinning and composite unit also showed consistency of results with the overall textile sector but outcome of weaving unit showed a significantly positive relationship between dependent and independent variables. Practical Implications- The findings enhance the knowledge base of determinants optimal capital structure and are likely to help companies take effective decision related to capital structure needs. Furthermore, the study is likely to help the decision makers better adjust themselves towards adopting and considering proficient ways of managing capital structure of a firm.
|Date of creation:||2012|
|Publication status:||Published in Journal of Management and Social Sciences Fall 2012.8 (2)(2012): pp. 01-10|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Judith Jordan & Julian Lowe & Peter Taylor, 1998. "Strategy and Financial Policy in UK Small Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1&2), pages 1-27.
- Stephen A. Ross, 1977. "The Determination of Financial Structure: The Incentive-Signalling Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 23-40, Spring.
- Loof, Hans, 2004.
"Dynamic optimal capital structure and technical change,"
Structural Change and Economic Dynamics,
Elsevier, vol. 15(4), pages 449-468, December.
- Lööf, Hans, 2004. "Dynamic Optimal Capital Structure and Technical Change," Working Paper Series in Economics and Institutions of Innovation 23, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
- Muhammad Rafiq & Asif Iqbal & Muhammad Atiq, 2008. "The Determinants of Capital Structure of the Chemical Industry in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(1), pages 139-158, Jan-Jun.
- Syed Tahir Hijazi & Yasir Bin Tariq, 2006. "Determinants of Capital Structure: A Case for the Pakistani Cement Industry," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 11(1), pages 63-80, Jan-Jun.
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
- Harris, Milton & Raviv, Artur, 1990. " Capital Structure and the Informational Role of Debt," Journal of Finance, American Finance Association, vol. 45(2), pages 321-349, June.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Attaullah Shah & Tahir Hijazi, 2004. "The Determinants of Capital Structure of Stock Exchange-listed Non-financial Firms in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 605-618.
- MacKie-Mason, Jeffrey K, 1990. " Do Taxes Affect Corporate Financing Decisions?," Journal of Finance, American Finance Association, vol. 45(5), pages 1471-1493, December.
- Jeffrey MacKie-Mason, 1988. "Do Taxes Affect Corporate Financing Decisions?," NBER Working Papers 2632, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
- Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
- Kale, Jayant R & Noe, Thomas H & Ramirez, Gabriel G, 1991. " The Effect of Business Risk on Corporate Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 46(5), pages 1693-1715, December.
- Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
- Joshua Abor, 2008. "Determinants of the Capital Structure of Ghanaian Firms," Research Papers RP_176, African Economic Research Consortium.
- Kraus, Alan & Litzenberger, Robert H, 1973. "A State-Preference Model of Optimal Financial Leverage," Journal of Finance, American Finance Association, vol. 28(4), pages 911-922, September.
- Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
- Aydin Ozkan, 2001. "Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(1-2), pages 175-198.
- Ijaz Hussain, 2011. "Growth and Financing Behaviour of Firms of Textile Industry in Pakistan: A Panel Data Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 699-714. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:51068. 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: (Joachim Winter)
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.