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CC BY V4.0, Open Access
Journal article
The Moderating Role of Debt Financing on the Relationship Between Leverage and Performance: An Empirical Analysis of the Textile Sector of Pakistan
Organization Theory Review, Vol.2(1)
2018
Abstract
The study examines how debt financing affects the leverage and performance relationship of the textile sector of Pakistan. The study also strives to elaborate the determinants of debt financing. Data has been collected from the annual reports of the textile companies listed at Pakistan Stock Exchange (PSE) for the years 2010-2015. Panel data techniques including Pooled OLS, Fixed Effect model, Random Effect model, and Moderated Panel Regression model were used for estimating the relationship between debt ratio, leverage and company-specific variables such as profitability and size. The results depict that the listed textile companies of Pakistan financed more than half of its assets by external borrowing. There is high asset tangibility in the Pakistani textile industry. The tax shield, which is the alternative of depreciation, is limited for the textile firms of Pakistan (Qamar, Farooq, Afzal & Akhtar, 2016). The independent variables’ interaction term with debt ratio shows a positive relationship with ROA other than asset tangibility. The trade-off theory suggests to follow a targeted optimal capital structure which is more favorable for a firm. Pakistani textile industry should adopt the model of optimal capital structure for balancing the costs and benefits.
Details
- Title
- The Moderating Role of Debt Financing on the Relationship Between Leverage and Performance: An Empirical Analysis of the Textile Sector of Pakistan
- Authors/Creators
- Ummara Fatima - Murdoch University, Murdoch Business School
- Publication Details
- Organization Theory Review, Vol.2(1)
- Publisher
- School of Professional Advancement University of Management and Technology Lahore, Pakistan.
- Number of pages
- 15
- Identifiers
- 991005852488107891
- Copyright
- (c) 2021 University of Management and Technology Lahore, Pakistan.
- Murdoch Affiliation
- Murdoch Business School
- Language
- English
- Resource Type
- Journal article
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