Effect of Leverage on Stock Returns and Systematic Risk: Evidence from Pakistani Industries

Adeel Rahim, Zahirullah Khan, Taimoor Alam, Humair Khan

Abstract


This paper evaluates the effect of leverage on stock returns and systematic risk in the corporate sector of Pakistan. It determines the relationship between leverage and systematic risk. Data was collected from eight industries such as; Cotton, Engineering, Chemicals, Sugar and Allied, Cement, Fuel and Energy, and transport and Communications. High leverage was experienced which leaded to high level of systematic risk and volatility in the stock prices.

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