Impact of capital structure on profitability and earnings of the firm; a study on Pakistani companies from Non-Financial sector

  • Authors

    • Hasnain Raza university of central punjab
    • Faiza Akhtar
    • Mohsin Rehman
    • Sehrish Naeem
    • Muhammad Aamir Ali
    2017-08-21
    https://doi.org/10.14419/ijaes.v5i2.8082
  • Eviews 8, Panel Regression, Hausman Test, Random Effect Model, ROE, EPS, DE and DA.

  • Capital structure is the driver of profitability and earnings of any company; therefore, the impact of capital structure is analyzed in companies selected from non-financial sector of Pakistan including public and private sector. The financial data of 22 companies has been observed from 2010-2015. Eviews 8 has been used to analyze the panel regression. The Hausman test confirms that random effect model is appropriate for both ROE and EPS. Findings reveal that DE is insignificantly negatively related to ROE but significantly positively related to EPS, where DA is insignificantly positively related to ROE but significantly negatively related to EPS. The policy makers of sample companies should consider the impact of capital structure on EPS.

  • References

    1. [1] Ali, A. U. (2016). Impact of Capital Structure on Profitability: A Comparative Study of Cement &Automobile Sector of Pakistan. Journal of Managerial Sciences, Volume X Number, 1, 120.

      [2] Chisti, k. a. (2013). Impact of capital structure on profitability of listed companies (evidence from India). USV annals of economics & public administration, 13(1).

      [3] Kodongo, O. M.-M. (2015). Capital structure, profitability and firm value: panel evidence of listed firms in Kenya. African Finance Journal, 17(1), 1-20.

      [4] Maina, L. &. (2014). Capital structure and financial performance in Kenya: Evidence from firms listed at the Nairobi Securities Exchange. International Journal of Social Sciences and Entrepreneurship, 1(11), 209-223.

      [5] Muathe, S. M. (2014). Relationship between capital structure and performance of non-financial companies listed in the Nairobi Securities Exchange, Kenya.

      [6] SBP. (n.d.). Publications. Retrieved May 18, 2017, from www.sbp.org.pk: http://www.sbp.org.pk/publications/Pub-Ann.htm

      [7] Zeitun, R. &. (2014). Capital structure and corporate performance: evidence from Jordan.

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  • How to Cite

    Raza, H., Akhtar, F., Rehman, M., Naeem, S., & Aamir Ali, M. (2017). Impact of capital structure on profitability and earnings of the firm; a study on Pakistani companies from Non-Financial sector. International Journal of Accounting and Economics Studies, 5(2), 118-123. https://doi.org/10.14419/ijaes.v5i2.8082