Impact of Capital Structure on Firm Value and the Moderating Role of Covid-19.

Abstract

The moderating role of Covid-19 in the relationship between capital structure and firm value in Pakistan, an emerging economy, is investigated in this study. To achieve this goal, 193 non-financial listed companies on (PSX) have been chosen from 2016 to 2021. Panel data analysis empirical findings show a strong relationship between capital structure and other control variables with firm value. According to the analysis findings, before the period of Covid-19, the capital structure had an inverse relationship with firm value. Furthermore, firm size has an inverse relationship with firm value. On the other hand, profitability has a significant positive effect on firm value. So, when we investigated the impact of Covid-19 on firm value, we discovered that the value of non-financial firms increased during the Covid-19 period. The impact of the variables remained constant. Still, the intensity of the relationships between variables fluctuated. For example, during Covid-19, the inverse relationship between firm size and firm value decreased, and the positive relationship between firm profitability and firm value decreased. During Covid-19, the inverse relationship between firm value and capital structure remained unchanged