An Empirical Analysis of Capital Structure on Accounting and Financial Profitability: Evidences from Pakistan Listed Companies

Abstract

This study examines the impact of capital. structure on accounting and financial profitability for the seven randomly selected non-financial sectors listed companies in Pakistan Stock Exchange (PSX) for the period of 2014-2018. Applying descriptive statistics, correlations and regression analysis and PCA, the results reported positive but statistically insignificant impact of short-term debt on EPS, ROA. Additionally, the results reveal negative and statistically insignificant influence of short-term debt on ROE. Furthermore, the output indicated a positive and statistically significant impact of long-term debt on EPS and ROA while insignififWnt relation with ROE. Moreover, the results reveal positive and statistically significant influence of equity on EPS, ROA and ROE. Further, the principle component analysis output reveals tha.~ EPS is greatly effect by capital structure. It was proved that capital structure has influence on firl'Y! performance so managers should adopt essential carefulness while taking decisions regarding capital structure.