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ROLE OF CAPITAL STRUCTURE IN FINANCIAL PERFORMANCE OF NONFINANCIAL SECTOR FIRMS EVIDENCE FROM PAKISTAN STOCK EXCHANGE

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01 Pages : 1-16

http://dx.doi.org/10.31703/ger.2020(V-II).01      10.31703/ger.2020(V-II).01      Published : Jun 2020

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

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.

    Capital Structure, Financial Performance, Non-Financial Sector

    (1) Hafiz Abdur Rashid
    PhD Scholar, Superior College, Lahore, Punjab, Pakistan.
    (2) Ahmed Raza Bilal
    Associate Professor, Department of Business & Management Sciences, Superior College, Lahore, Punjab, Pakistan.
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Cite this article

APA

    APA : Rashid, H. A., & Bilal, A. R. (2020). Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange. Global Economics Review, V(II), 1-16. https://doi.org/10.31703/ger.2020(V-II).01

CHICAGO

    CHICAGO : Rashid, Hafiz Abdur, and Ahmed Raza Bilal. 2020. "Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange." Global Economics Review, V (II): 1-16 doi: 10.31703/ger.2020(V-II).01

HARVARD

    HARVARD : RASHID, H. A. & BILAL, A. R. 2020. Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange. Global Economics Review, V, 1-16.

MHRA

    MHRA : Rashid, Hafiz Abdur, and Ahmed Raza Bilal. 2020. "Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange." Global Economics Review, V: 1-16

MLA

    MLA : Rashid, Hafiz Abdur, and Ahmed Raza Bilal. "Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange." Global Economics Review, V.II (2020): 1-16 Print.

OXFORD

    OXFORD : Rashid, Hafiz Abdur and Bilal, Ahmed Raza (2020), "Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange", Global Economics Review, V (II), 1-16

TURABIAN

    TURABIAN : Rashid, Hafiz Abdur, and Ahmed Raza Bilal. "Role of Capital structure in financial performance of non-financial sector firms: Evidence from Pakistan Stock Exchange." Global Economics Review V, no. II (2020): 1-16. https://doi.org/10.31703/ger.2020(V-II).01