Leverage Analysis of Non-Financial Organizations: An Anamnesis of Emergent and Rising Economy
The aim of this analysis is to figure out the key determinants of capital structure which affect the investing choices of the enterprises registered in Pakistan stock exchange (PSX). The theme of the experimentation is a decomposed analysis of capital structure: evidence from Pakistan manufacturing sector. This research has been conducted to explain and analyze the influence of various determinants of capital structure on leverage of non-monetary enterprises listed at PSX. The independent variable of the research is profitability, growth opportunities, firm size, asset tangibility, non-debt tax shield, risk, tax, asset structure, liquidity, and earning volatility. The dependent variable is leverage which is decomposed into eight measures. The data adopted in this investigation is secondary data which is acquired from financial statement analysis and balance sheet analysis issued by State bank of Pakistan. The research is performed by applying panel data program on 55 non-monetary corporations listed at Pakistan stock exchange from 2005 to 2017. Two theories of capital structure which are discussed in this analysis are trade off theory, and pecking order theory. Main findings of the study stated that profitability, asset tangibility, and risk have positive association with leverage, whereas negative correlation with earning volatility, asset structure, liquidity, and firm size. On the other hand, growth opportunities, non-debt tax shield, and tax have insignificant association with leverage. Moreover, results of the study neither fully support trade off theory nor pecking order theory.
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