Firm Characteristics And Financing Decision: The Moderating Effect Of Covid-19 In Emerging Market

Abstract

The study examines the relationship between firm-level characteristics and leverage ratio.  It further examines whether the Covid-19 pandemic has moderated this relationship. The study extracted data from Annual Reports of the companies and PSX website from 2013 to 2023 for the said purpose. Using panel fixed effect regression model the study finds that profitability has negatively affected leverage, even after controlling for heteroscedasticity and serial correlation which support the pecking order theory. Growth opportunities also influence the financing decision, but the result is statistically weak. Findings reveal that tangibility, size and Covid-19 pandemic don’t play significant role in the firm financing decision. Further analysis reveals that pandemics have not statistically moderated the firm financing decision during pandemic period. Findings of the study have also implications for policy makers and banking authorities.

Keywords:

leverage ratio, Covid-19, regression model, tangibility, policy makers