Impact of Capital Structure on Firms Performance: A Study on Karachi Stock Exchange (KSE) Listed Firms in Pakistan

Basit, A., & Hassan, Z. (2017). Impact of Capital Structure on Firms Performance: A Study on Karachi Stock Exchange (KSE) Listed Firms in Pakistan. International Journal of Management, Accounting and Economics, 4(2), 118-135.

18 Pages Posted: 4 Apr 2017

See all articles by Abdul Basit

Abdul Basit

International University of Malaya-Wales

Zubair Hassan

International University of Malaya Wales

Date Written: February 1, 2017

Abstract

The purpose of this study is to investigate Debt to Equity ratio to determine firm performance of Pakistani companies listed in Chemical, Food and Care products, Cement, Pharmaceutical, Auto assembler and Textile sector. The research done on 50 companies listed under Karachi Stock exchange covered the period of 2010-2014, total observations of 250 firms-years. The independent variable is Debt to Equity and dependent variables are Size, Earnings per Share, Return on Assets, Return on Equity and Marketing. The research employed Descriptive Statistics, Pearson correlation coefficient and multiple linear regressions and the findings shows Earnings per share, Return on Equity and Return on Assets are significantly correlated to Debt to Equity ratio. While Debt to equity ratio founds a significant impact on Size and Return on Assets. Furthermore, it is recommended that other firm specific factors can also be used with a more wider time span like Dividends, Taxes etc to gauge the impact and end with a more accurate outcome. This Study will eventually benefit the finance mangers to define an optimal capital structure and also the research community by providing new knowledge regarding the impacts of capital structure. Though, other major economies can also be examined with different other industries to check the deviation of capital structure formation.

Keywords: Capital Structure, Firm Performance, ROA, ROE, EPS, Firm Size, Marketing, KSE

JEL Classification: IJMAE

Suggested Citation

Basit, Abdul and Hassan, Zubair, Impact of Capital Structure on Firms Performance: A Study on Karachi Stock Exchange (KSE) Listed Firms in Pakistan (February 1, 2017). Basit, A., & Hassan, Z. (2017). Impact of Capital Structure on Firms Performance: A Study on Karachi Stock Exchange (KSE) Listed Firms in Pakistan. International Journal of Management, Accounting and Economics, 4(2), 118-135., Available at SSRN: https://ssrn.com/abstract=2945807

Abdul Basit

International University of Malaya-Wales ( email )

Ground Floor, Block A, City Campus
Jalan Tun Ismail, KS Kuala Lumpur 50408
Malaysia
011-36848347 (Phone)

HOME PAGE: http://https://iumw.edu.my/

Zubair Hassan (Contact Author)

International University of Malaya Wales ( email )

Level 2, Block A
Jalan Tun Islami
Kuala Lumpur, Kuala Lumpur 50480
Malaysia
0176374627 (Phone)
50480 (Fax)

HOME PAGE: http://https://iumw.edu.my/

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