Capital structure, competitive intensity and firm performance: evidence from Pakistan

Naveed Ahmed and Talat Afza

Journal of Advances in Management Research, 2019, vol. 16, issue 5, 796-813

Abstract: Purpose - The purpose of this paper is to explore the moderating role of competitive intensity between the existing relationship of capital structure and firm performance. Design/methodology/approach - Using the balanced panel data of listed non-financial firms of Pakistan, the present study adopts both the panel and OLS estimation techniques to draw the inferences. Findings - The results exhibit that high debt ratio is harmful for the accounting performance of the selected sample firms of Pakistan. In addition, product market competition negatively moderates the relationship between capital structure and firm performance which suggests that high product market competition can be used as a substitute of debt financing to align the interests of a firm’s managers and shareholders. Practical implications - The findings of the research provide evidence for the policy makers/regulators that the sample firms should discourage the high debt financing in the presence of competitive intensity in the product marketplace. Originality/value - The core contribution of the current research is to examine the moderating role of product market competition on the leverage–performance relationship because, to the best of the authors’ knowledge, no single study has previously explored this relationship in the context of Pakistan.

Keywords: Capital structure; Firm performance; Competitive intensity; Non-financial firms of Pakistan (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:jamrpp:jamr-02-2019-0018

DOI: 10.1108/JAMR-02-2019-0018

Access Statistics for this article

Journal of Advances in Management Research is currently edited by Prof Ravi Shankar and Prof Surendra Yadav

More articles in Journal of Advances in Management Research from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().