Effect of Capital Structure And Taxation On Firm Financial Performance; A Case of Automobile Sector

Abstract

The purpose of this study was to empirically determining the relationship of taxation and capital structure for Pakistan automobile sector. Data of automobile sector has taken from SBP balance sheets from year 2005-2019. The Data of 16 automobiles companies has used for analysis. Fixed effect method used for data regression. Results showed that association of Return on Equity with Debt Ratio (TR), Total Debt to equity ratio of Firm (TD), Tax expenses of the frim (TX) and Total equity of the firm (EQ). The results showed fluctuations in debts and have no impact on automobile productivity and paid taxes have impact on equity of both firms. TX is significant and has impact on ROE. It is suggested by researcher that a progressive tax policy adopt by the Government could benefit the automobile sector. The debt to equity ratio in the long-run act as less effective but in case if the debt exceeds a certain limit it can put a firm on leverage in the short run.