Financial Leverage Decision in Cement Sector of Pakistan

Yasir Saeed, Tariq Mahmood

Abstract


This paper attempts to understand the behaviour of firms in cement sector of
Pakistan regarding its financial structure decision. A typical firm will consider various factors before it adopts a specific blend of liability and equity in its capital structure. This paper uses four factors named as tangibility, profitability, size and growth. Panel data analysis is adopted to check the relationship of these factors with financial leverage for the period of 1999 to 2014. The results are explained considering existing but competing theories. It is observed that profitability and tangibility have significant relation with capital structure decision. These relationships can be explained with the existing theories, however, there was not enough evidence to consider any of the theories as superior.


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ISSN 2521 – 5515