DETERMINANTS OF CAPITAL STRUCTURING: AN EMPIRICAL STUDY OF GROWTH AND FINANCING BEHAVIOR OF FIRMS OF TEXTILE SECTOR IN PAKISTAN

Imran Umer Chhapra () and Muhammad Asim ()
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Imran Umer Chhapra: KASB Institute of Technology (KASBIT)
Muhammad Asim: Karachi University Business School

IBT Journal of Business Studies (JBS), 2012, vol. 8, issue 2, 1-10

Abstract: Purpose Purpose of this study is to investigate the determinants of optimal capital structuring that affect growth and financing behavior of textile sector firms in Pakistan keeping in view the important role capital structuring plays in any firms financial management decisions and the positive contribution it makes to the creation of firms value and profitability. Methodology/sample Size of the firm capital, profitability, fixed assets structure and taxes were used as control variables to investigate the determinants of optimal capital structuring of textiles companies.A sample size of 90 textile companies across the country were selected and their data for the 2005 2010 period was used.The determinants of optimal capital structure were examined using correlation and regression analyses.Fvalue was calculated to test the fitness of overall model. Findings Results of the study showed a negative relationship between dependent variable financial leverage and independent variables.The statistical analysis of spinning and composite unit also showed consistency of results with the overall textile sector but outcome of weaving unit showed a significantly positive relationship between dependent and independent variables. Practical Implications The findings enhance the knowledge base of determinants optimal capital structure and are likely to help companies take effective decision related to capital structure needs.Furthermore, the study is likelly to help the decision makers better adjust themselves towards adopting and considering proficient ways of managing capital structure of a firm.

Keywords: Capital Structure; Financial Leverage; Profitability; Taxes; Gearing Ratio (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aib:ibtjbs:v:8:y:2012:i:2:p:1-10

DOI: 10.46745/ilma.ibtjbs.2012.82.0

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