Ownership, leverage and financial performance of Pakistan corporate sectors with

Abstract

This research study focuses on examining the relationship of family and nonfamily firms with financial leverage and financial performance of firm. Also this study aims at analyzing the relationship between financial leverage and firm performance. The study separates both family and nonfamily ownership in Pakistan corporate sector in order to provide a better picture for companies to continue growth in uncertain economic conditions. The population of the study contain Pakistan industrial sector and 12 years’ data from 1999 to 2010 of 120companies from textile, chemical, cement and sugar sectors of Pakistan corporate has been gathered for the analysis purpose. The data was analyzed used regression analysis. This study shows that nonfamily can increase financial performance in Pakistani firms. Active nonfamily ownership, in which a person, a family or a group of companies does not hold more than 30% share or family members does not at least one of the top two officer positions, improves profitability where the firms where these conditions are applied have decreases in their financial performance. Similarly, nonfamily ownership has a positive relationship with financial leverage and financial leverage has a negative relationship with financial performance.