Affect of financial leverage on firm performance. Empirical evidence from Karachi Stock Exchange

Muhammad Raza ()

MPRA Paper from University Library of Munich, Germany

Abstract: Using panel data analysis, we attempt to find the determinants of capital structure of KSE listed none-financial firms for the period 2004-2009. We first present some descriptive statistics on our selected variables. The most interesting finding of our descriptive statistics is the highest leverage ratio for textile industry whereas the average profitability of textile industry is negatives. The results of this study shows negative relation between performance and leverage. Long term debt is more expensive due to certain direct and indirect costs. Therefore employing high level of debt results low profitability. The result of second hypothesis shows no significance between leverage and profitability. On the basis of these findings it is concluded that profitability is consistent with picking order theory. In the light of above discussion we can say that the existing theories of capital structure contribute to some extent in decision making process.

Keywords: Financial leverage; Capital structure; Return on Assets; Debt to Equity; Picking Order Theory (search for similar items in EconPapers)
JEL-codes: M1 M16 M19 (search for similar items in EconPapers)
Date: 2013-09-01
New Economics Papers: this item is included in nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/50383/1/MPRA_paper_50383.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:50383

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().