Share Price, debt ratio, degree of financial leverage, firm size, ordinary least square, automobile sector


Investors are very sensitive for their investment as they keep eyes on the performance of the company and price of the share. The aim of this paper is to depict the effects of financial leverage on share price of the automobile sector companies listed at Pakistan Stock Exchange. The data type is panel for the period of fifteen years from 2004 to 2018; analyzed through Descriptive Statistics, Panel unit root test, and Ordinary least square Random effects model to determine the relationship between dependent and explanatory variables. The results found that debt ratio has significant negative relationship with share price, and the degree of financial leverage has significant negative relationship with share price. It concludes that more debt in capital structure is not beneficial for share price, and size.

Author Biographies

Maria Tufail Memon, University of Sindh, Jamshoro

Maria Tufail Memon is a research scholar and currently doing her PhD at the University of Sindh Jamshoro. She has completed her MPhil in Management Sciences from Muhammad Ali Jinnah University Karachi, in 2019.

Tayyaba Rafique Makhdoom, University of Sindh, Jamshoro

Dr. Tayyaba Rafique Makhdoom has been serving as an Assistant Professor at Sindh University Laar Campus Badin Pakistan for 12 years. She earned her PhD degree in Business Administration from University of Sindh Jamshoro Pakistan. 

Nadia Naz, Muhammad Ali Jinnah University, Karachi

Nadia Naz is an MS Scholar at Department of Management Sciences, Muhammad Ali Jinnah University, Karachi.

Muhammad Shoaib, Sindh University Laar Campus Badin

Muhammad Shoaib is a BBA Student at Sindh University Laar Campus Badin


Abraham, M., & Saidi, A. (2010). The impact of accounting variables and characteristics of

Company’s stock price companies listed in Tehran stock Exchange. Journal of

Accounting and Auditing 17(62), 1-16.

Abdullah, Mohammad (2015). The Impact of Financial Leverage and Market Size on Stock

Returns on the Dhaka Stock Exchange: Evidence from Selected Stocks in the

Manufacturing Sector. International Journal of Economics, Finance and

Management Sciences. 3. 10. 10.11648/j.ijefm.20150301.12.

Adami, R. Gough,O., & Muradoglu, Y. (2015). How does a Financial Firm’s capital structure

affect the stock performance? Frontier In Finance And Economics. 12(1), 1-31.

Andersson, M. (2017). The Effects of Leverage on Stock Returns. University essay from Lunds universitet/Nationalekonomiska institutionen. Retrieved from .

Anup, C., & Suman Paul, C. (2010). Impact of Capital Structure on Firm’s value evidence

from Bangladesh. BEH Business and Economic Horizon, 3(3), 111-112.

Arslan, I., Hasan, R., Muhammad, F., & Mubeen, M. (2016). Impact of leverage on share price: Evidence from cement sector of Pakistan. Industrial Engineering Lettters, 6(6), 44-46.

Barakat, A. (2014). The Impact of financial structure, Financial leverage and Profitability on

industrial companies share value (applied study on a sample of Saudi industrial

companies). Research Journal of Finance and Accounting , 1(5), 55-66.

Bhandri, L. (1988). Debt/Equity ratio and Expected Common Stock Returns: Empirical

Evidence. Journal of Finance, 43(2), 507-528.

Bhatti et al. (2010). Affect of Leverage on Risk and Returns: Evidence from Pakistani

Companies. International Research journal of Finance and Economics, 32-39.

Chi, j., & Zhang, Z. (2011). Leverage Change, Debt Overhang and Stock Prices. Journal of

Corporate Finance 391-402.

Elangkumaran, P., & Balasundar, N. (2013). Leverage and Its Impact on Earnings and Share Prices. International Journal of Technological Exploration and Learning (UTEL), 2(4), 166-171.

Hussain, M & Gul, S. (2011). The Impact of Capital structure on Cement sector in Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 3(3), 778-800.

Justus, N. O., & Solomon, M. M. (2018). The Effect of Leverage on Share Prices at the Nairobi Securities. Journal of Business and Management, 20(6), 19-25. doi:10.9790/487X-2006081925

Mohammad, N. A., Kamruddin, P., Tarana, K., & Rahat, B. T. (2015). The impact of financial leverage and market size on stock exchange: Evidence from selected stocks in the manufacturing sector. International Journal of Economics, Finance and Management Sciences, 3(1), 10-15. doi:10.11648/j.ijefm.20150301.12

Muhammad, H., Shah, B., & Zia ul Islam. (2014). The Impact of Capital Structure on Firm Performance: Evidence from Pakistan. Journal of Industrial Distribution & Business, 5(2), 13-20. doi:doi:

Sadaf, M., Atiya, S., & Ammad, Z. (2017). The Effect of Financial Leverage and Market Size on Stock Returns on the Karachi Stock Exchange: Evidence from Selected Stocks in Non-Financial Sector of Pakistan. The International Journal Of Business & Management, 5(10), 246-252.

Umer, I., & Muhammad, U. (2018). Impact of financial leverage on firm performance. SEISENSE Journal of Management, 71-76.

Vahid, B., Mehdi, B., & Rezvan, B. (2013). Analysis between financial leverage with the stock price and the operational performance of the accepted companies in Tehran's Stock Exchange. European Online Journal of Natural and Social Sciences, 2(3), 25-34.