Impact of Financial Leverage on Firms’ Profitability: An Investigation from Cement Sector of Pakistan

Research Journal of Finance and Accounting, Vol. 6, No. 7, 2015. ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)

7 Pages Posted: 8 May 2015 Last revised: 3 Apr 2016

See all articles by Nawaz Ahmad

Nawaz Ahmad

RTS (Research, Trainings, and Solutions); Mehran University of Engineering & Technology

Atif Salman

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST)

Aamir Shamsi

Institute of Business Management; IoBM (CBM)

Date Written: April 30, 2015

Abstract

This research is an attempt to establish a stochastic relationship between Financial leverage and Profitability of cement sector operating in Pakistan. For this purpose 18 cement manufacturers out of 21 are incorporated in the study and six years annual data from 2005 to 2010 regarding financial leverage and profitability of the said firms were taken into consideration. The sample size for eighteen firms for six years consists of 108 observations. An Ordinary Least Square model is applied on the data to establish a causal relationship between the variables. The study finds that financial leverage has a statistically significant inverse impact on profitability at 99% confidence interval.

Keywords: Financial Leverage, Firms’ profitability, OLS

JEL Classification: C12, G32, L61

Suggested Citation

Ahmad, Nawaz and Salman, Atif and Shamsi, Aamir, Impact of Financial Leverage on Firms’ Profitability: An Investigation from Cement Sector of Pakistan (April 30, 2015). Research Journal of Finance and Accounting, Vol. 6, No. 7, 2015. ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online), Available at SSRN: https://ssrn.com/abstract=2603248

Nawaz Ahmad (Contact Author)

RTS (Research, Trainings, and Solutions) ( email )

9th Nishat Lane, DHA 6
9th Nishat Lane, DHA 6
Karachi, Sindh 75500
Pakistan
00923009292422 (Phone)

Mehran University of Engineering & Technology ( email )

Jamshoro, 76062
Pakistan
+923009292422 (Phone)

Atif Salman

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST) ( email )

90 and 100 Clifton
Karachi, ISLAMABAD 75600
Pakistan

Aamir Shamsi

Institute of Business Management ( email )

Korangi Creek Karachi, 75190
Karachi, 75190
Pakistan
+92-21-111-002-004 (Phone)
+92-21-35090968 (Fax)

IoBM (CBM) ( email )

Karachi
Pakistan

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