Nexus between Firm Financial Decision and Performance: Across Country Empirical Analysis

Abstract

The aim of this research is to find out more about the impact of financial decision determinants on firms’ financial performance using data of 28 lost companies of Pakistan and India base on their market capitalization, over a period from 2009 to 2019. Regression model analysis (GLS), fixed effect model analysis and random model analysis are employed while using different variables of Firms’ performance are considered as the dependent variable and they are measured by, Return on Asset (RoA) and Returns on equity (RoE). Financial decision determinants include Total debt to total asset (TDE), Long term debt to total assets (LDE) and Dividend pay-out ratio (DIV). Further, control determinants contain Firm size (SIZE), Operating cashflow to total assets (CSHFLW), Inflation (INF) and GDP. The findings reveal that Financial decision determinants i.e., TDE and LDE has negative significant impact on firms’ performance. While Dividend and has positive significant impact on productivity. Other control variables like cashflow and inflation has positive significant impact while Firm Size has negative significant impact, but GDP shows negative insignificant impact on firms’ performance.