Importance-Performance Map Analysis of Capital Structure Using PLS-SEM: Evidence from Non-financial Sector

Umme Habiba Rehman (), Ambreen Rehman (), Zeeshan Ahmed (), Muhammad Maaz Sajid () and Fasih Ur Rehman
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Umme Habiba Rehman: Research and Development, Innovazione Research CRO and SMO
Zeeshan Ahmed: Research and Development, Innovazione Research CRO and SMO
Muhammad Maaz Sajid: University of Liverpool

Chapter Chapter 14 in Partial Least Squares Path Modeling, 2023, pp 417-451 from Springer

Abstract: Abstract This study aims to identify the most important determinant that affects the capital structure decision of non-financial firms listed on the Pakistan Stock exchange (PSX) with balanced panel data of firm, industry, and macroeconomic-specific observations for the period of 14 years (2006–2019) and variance-based regression technique of partial least square structural equation modelling (PLS-SEM)Partial Least Squares (PLS)structural equation model (PLS-SEM). Subsequently ‘Importance-Performance Map Analysis’ (IPMA)Importance-Performance Map Analysis (IPMA) was performed to determine the most important determinant of capital structure decisions for Pakistan’s non-financial firms. The study illustrates the ceteris paribus interpretation that asset structure is the most important determinant of long-term debt selection in the capital structure decision for non-financial firms as such that leverage performance is increased by the amount of total effect of asset structure and cited tangibility as the most important indicator of asset structure in modelling the trend of capital structure which needs managerial attention to achieve optimal capital structure. The chapter provides prospects to financial managers and policy-makers for implementing better capital structure strategies to improve firm performance considering the importance of individual factors for the enrichment of investments and boost the economy.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-37772-3_14

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DOI: 10.1007/978-3-031-37772-3_14

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