Determinants Of Corporate Capital Structure A Study of Textile Sector in Pakistan

Abstract

This present study investigated whether a firm characteristics have an impact on corporate financial policies i.e. capital structure. Firms characteristics include Tangibility, Profitability, Firm size and Return on Asset (RAO). Capital structure is the mix of debt, preferred stocks and common stocks. It is very crucial for a firm to have optimal capital structure. Various theories of capital structure have given in depth detail of the optimal capital structure. The pecking order theory provides a chain of ways whereby firms finance its activities. It further claims that the firm has to finance internally from retained earnings and excess liquid assets and then to finance by using external financing as the last option. The trade-of theory argued that the optimal capital structure is the one which provides various benefits, including tax benefit. The Modigliani & Miller theory asserts that a firm when goes to finance will give priority to homemade leverage so that investors return remains stable.The current study has taken corporate capital structure as dependent variable and several independent variables i.e Tangibility, Firm size, Profitability, Return on Assets. The study has gone through over the analysis of panel data over a period of eleven years ranging from 2013 to 2023. The data was collected from the annual reports of textile firms listed on KSE-100. The population includes all textile firms listed on PSX and the sample size was selected by using convenience sampling technique.