Impact of International Economic Factors on The Capital Structure of Textile Industry in Pakistan

Abstract

This study has focused mainly on identifying the impact of international economic factors on capital structure in Pakistan. This study has considered non-debt tax shield, profitability, size of the firm, tangibility, foreign exchange risk and political risk as independent variables. Whereas, capital structure has been considered as the dependent variable in this study. However, this study has finalized textile industry of Pakistan to testify the relationship between variables mentioned above. The major emphasis in this study has been on assessing the relationship between non-debt tax shield, profitability, size of the firm, tangibility, foreign exchange risk and political risk (independent variables) and capital structure (dependent variable) in textile industry of Pakistan. Secondary sources of data (annual financial statements) have been used for data collection regarding variables of this study from the period of 2014 – 2019. A sample size of 180 observations has been finalized to represent the entire population. Collected data has then been analyzed through statistical instruments such as correlation and regression by using Strata. Based on the findings, it has been concluded that international economic factors (non-debt tax shield, profitability, size of the firm, tangibility, foreign exchange risk and political risk) has significant impact on capital structure (leverage) in textile industry of Pakistan.