NEXUS BETWEEN FINANCIAL LEVERAGE AND SHARE PRICE: EVIDENCE FROM AUTOMOBILE SECTOR LISTED AT PAKISTAN STOCK EXCHANGE

Maria Tufail Memon, Tayyaba Rafique Makhdoom, Nadia Naz, Muhammad Shoaib

Abstract


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.

Keywords


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

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Sarhad Journal of Management Sciences by Sarhad University of Science & Information Technology is licensed under a Creative Commons Attribution 4.0 International License.
Based on a work at suit.edu.pk