Debt Market Trends and Predictors of Specialization: An Analysis of Pakistani Corporate Sector

Kanwal Iqbal Khan, Faisal Qadeer, Mário Nuno Mata, Rui Miguel Dantas, João Xavier Rita and Jéssica Nunes Martins
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Kanwal Iqbal Khan: Institute of Business & Management, University of Engineering and Technology, Lahore 54000, Pakistan
Faisal Qadeer: Lahore Business School, The University of Lahore, Lahore 54000, Pakistan
Mário Nuno Mata: ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa, Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal
Rui Miguel Dantas: ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa, Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal
João Xavier Rita: ISCAL-Instituto Superior de Contabilidade e Administração de Lisboa, Instituto Politécnico de Lisboa, Avenida Miguel Bombarda 20, 1069-035 Lisbon, Portugal
Jéssica Nunes Martins: NOVA Information Management School (NOVA IMS), Universidade Nova de Lisboa, Campus de Campolide, 1070-312 Lisboa, Portugal

JRFM, 2021, vol. 14, issue 5, 1-16

Abstract: Recently, debt structure research has started focusing on the strategic perspective of financing choices, particularly to understand the reasons for debt specialization (DS). This paper examines trends of specialization over time and industry by using a comprehensive dataset on types of debt employed by the public limited companies during 2009–2018. The objective of the current study is to analyze the effect of debt market conditions by identifying significant predictors of DS. Time-series and cross-sectional results confirm the existence of DS, which is further validated by the findings of the cluster analysis. The empirical results indicate that overall, 61% of the companies solely rely on a single type of debt, mostly on short-term obligations accompanied by long-term secured and other debts. Moreover, small, mature, rated, group-affiliated, and low-leverage companies incline more towards this strategy. Credit rating, debt maturity, financial and interest coverage ratios serve as the primary determinants of the debt market that are significantly associated with the measures of DS. The results contribute to the capital structure literature by specifying that financing choice has an important implication in deciding the debt structure composition of the organizations.

Keywords: debt structure; capital structure; debt specialization; financing choices; debt market conditions; financial instruments; short-term loans; long-term loans (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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