Factors Determining Capital Structure of Pakistani Non-Financial Firms PDF Download

Author: Mumtaz Hussain Shah
Publisher:
ISBN:
Category :
Languages : en
Pages : 14

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Book Description
This study is undertaken to discover the factors determining the capital structure decision of non-financial Pakistani firms. The effect of firm's profitability, liquidity, size, tangibility and non-debt tax shield on capital structure decision of ten non-financial firms operating at Pakistan Stock Exchange is investigated for a period of ten years i-e from 2005-2014. By using fixed effects panel estimation method it is found that leverage ratio is inversely affected by profitability and current ratio of a firm. While, firm size, tangibility and non-debt tax shield positively effects leverage ratio. The influence of profitability is weakly significant whereas that of liquidity, size, tangibility and non-debt tax shield are strongly significant. The study also shows that results for profitability and liquidity are in accordance with the Pecking Order Theory and the result for size; tangibility and non-debt tax shield are in line with the Trade-Off Theory.

Author: Zahid Bashir
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659356575
Category :
Languages : en
Pages : 184

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Book Description
Debt financing decision is the most important and crucial decision in the study of capital structure and financial structure because it leads to firm's performance. The current Study empirically investigated a number of factors affecting debt financing decision and firm's performance for the non-financial companies listed in Karachi Stock Exchange of Pakistan for the period of 2005-2010. The financial theories like Tradeoff theory (TOT) and Packing order theory (POT) has also been tested in order to see the consistency of factors affecting the debt financing behavior in the current study with above said theories. A Panel data of 341 firms has been used for empirical analysis of the current Study. The variation in debt financing is measured by short-term, long term and total debt while the variation in firm's performance is measured by profitability and Return on Assets. The current study empirically examined the effect of firm's specific factors by econometric practice "one way-fixed effect regression model." The Current study will help the reader for understanding how the different factors affects debt financing and firm performance in non-financial sector of Pakistan

Author: Qurrat-ul-Ain
Publisher:
ISBN:
Category :
Languages : en
Pages : 24

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Book Description
The focal theme of this research paper is to investigate the effect of macroeconomic parameters on the capital structure of Pakistani firms. According to the best of our knowledge this is the first study of its kind in Pakistan and it will open new horizons of research in this area ultimately helping practitioners and academicians. Previous researches in the context of Pakistan have taken firm specific variables only while this study considers macroeconomic factors besides company specific variables. A panel data (for a period of 2003 to 2009) for KSE-100 (non-financial firms) has been analyzed by using SUR (Seemingly Unrelated Regression) model. The main findings of this study elucidate that macroeconomic variables have varying effects as far as capital structure's measurement is concerned. The market size (stock market development) has a positive effect on debt choice of Pakistani firms. Bank size is directly related with long term debt to equity of these firms. The correlation between inflation rate and financial leverage (long term debt to equity as well) is negative, whereas, it has a positive relation with external financing ratio. GDP per capita is inversely related with all debt ratios. SBP discount rate is though negative but statistically insignificantly related with all debt ratios. All firm level variables, like ROE, ROA, Q ratio, Assets tangibility, Dividend pay out policy and risk proved to be significant with all debt ratios. Hence, this research study supports the existing literature related to capital structure, chiefly in the case of company specific variables.

Author: Attaullah Shah
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
In this paper, we study the potential determinates of the capital structure of non-financial firms listed on Karachi Stock Exchange. We analyse a sample of 445 firms listed on the KSE for the period 1997-2001. We have chosen tangibility of assets, size, firm growth rate, and profitability as independent variables, and measure their effect on debt/total asset ratio (proxy for leverage). Using the technique of panel data analysis, we observe that of the four independent variables, growth, size, and profitability have significant effect on leverage. However, we do not find tangibility as significantly correlated with leverage.

Author: Leora Klapper
Publisher: World Bank Publications
ISBN:
Category : Business law
Languages : en
Pages : 60

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Book Description
"Using a comprehensive database of firms in Western and Eastern Europe, we study how the business environment in a country drives the creation of new firms. Our focus is on regulations governing entry. We find entry regulations hamper entry, especially in industries that naturally should have high entry. Also, value added per employee in naturally "high entry" industries grows more slowly in countries with onerous regulations on entry. Interestingly, regulatory entry barriers have no adverse effect on entry in corrupt countries, only in less corrupt ones. Taken together, the evidence suggests bureaucratic entry regulations are neither benign nor welfare improving. However, not all regulations inhibit entry. In particular, regulations that enhance the enforcement of intellectual property rights or those that lead to a better developed financial sector do lead to greater entry in industries that do more R & D or industries that need more external finance"--National Bureau of Economic Research web site.

Author: Agha Jahanzeb
Publisher:
ISBN:
Category :
Languages : en
Pages : 218

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Author: Wali Ullah
Publisher:
ISBN:
Category :
Languages : en
Pages : 23

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Book Description
This study empirically examines the determinants of capital structure choice of listed firms in Pakistan. A pooled sample of 535 public listed non-financial companies from 1988 to 2005 is used to establish the relationship between leverage and its determinants by using autoregressive distributed lag (ARDL) econometric framework. The results indicate that size of the firm and growth opportunities are positively related to debt ratio. A highly consistent result is that more profitable and highly liquid firms will avoid debt and will rely mainly on equity financing. Similarly firms with high risk and more tangible assets will use less debt. Moreover the results suggest that state owned firms have been financed heavily through bank loans and that there is a substantial decrease in leverage after the reforms in financial and corporate sector of 1990s in Pakistan. The secondary market development and financial liberalization has been associated with shift of firms from debt market to equity market. There is strong evidence indicating that choice of capital structure differs significantly across industries.

Author: Yamini Agarwal
Publisher: John Wiley & Sons
ISBN: 111820316X
Category : Business & Economics
Languages : en
Pages : 208

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Book Description
Inside the risk management and corporate governance issues behind capital structure decisions Practical ways of determining capital structures have always been mysterious and riddled with risks and uncertainties. Dynamic paradigm shifts and the multi-dimensional operations of firms further complicate the situation. Financial leaders are under constant pressure to outdo their competitors, but how to do so is not always clear. Capital Structure Decisions offers an introduction to corporate finance, and provides valuable insights into the decision-making processes that face the CEOs and CFOs of organizations in dynamic multi-objective environments. Exploring the various models and techniques used to understand the capital structure of an organization, as well as the products and means available for financing these structures, the book covers how to develop a goal programming model to enable organization leaders to make better capital structure decisions. Incorporating international case studies to explain various financial models and to illustrate ways that capital structure choices determine their success, Capital Structure Decisions looks at existing models and the development of a new goal-programming model for capital structures that is capable of handling multiple objectives, with an emphasis throughout on mitigating risk. Helps financial leaders understand corporate finance and the decision-making processes involved in understanding and developing capital structure Includes case studies from around the world that explain key financial models Emphasizes ways to minimize risk when it comes to working with capital structures There are a number of criteria that financial leaders need to consider before making any major capital investment decision. Capital Structure Decisions analyzes the various risk management and corporate governance issues to be considered by any diligent CEO/CFO before approving a project.

Author: Sharjil M. Haque
Publisher: International Monetary Fund
ISBN: 1589064127
Category : Business & Economics
Languages : en
Pages : 51

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Book Description
We study the impact of the COVID-19 recession on capital structure of publicly listed U.S. firms. Our estimates suggest leverage (Net Debt/Asset) decreased by 5.3 percentage points from the pre-shock mean of 19.6 percent, while debt maturity increased moderately. This de-leveraging effect is stronger for firms exposed to significant rollover risk, while firms whose businesses were most vulnerable to social distancing did not reduce leverage. We rationalize our evidence through a structural model of firm value that shows lower expected growth rate and higher volatility of cash flows following COVID-19 reduced optimal levels of corporate leverage. Model-implied optimal leverage indicates firms which did not de-lever became over-leveraged. We find default probability deteriorates most in large, over-leveraged firms and those that were stressed pre-COVID. Additional stress tests predict value of these firms will be less than one standard deviation away from default if cash flows decline by 20 percent.

Author: Charles Albert Eric Goodhart
Publisher: MIT Press
ISBN: 9780262071673
Category : Business & Economics
Languages : en
Pages : 560

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Book Description
As economic advisor to the Bank of England for many years, C. A. E. Goodhart is uniquely positioned to assess the role of the central bank in the modern financial system. This book brings together twenty-one of his previously published articles dealing with the changing functions of central banks over time, recent efforts to maintain price stability, and debates over specific financial regulation proposals in the UK. Although the current day-to-day operations of central banks are subject to continuous comment and frequent criticism, their structural role within the economic system as a whole has generally been accepted without much question, despite several attempts by economists in recent decades to challenge the value of the institution. C. A. E. Goodhart brings his knowledge of both the theoretical arguments and the actual working of central banks to bear in these essays. Part I looks at the general purposes and functions of central banks within the financial system and their evolution over time. Part II concentrates on the current objectives and operations of central banks, and the maintenance of price stability in particular. Part III analyzes the broader issues of financial regulation.