Abstract:
The purpose of the study is to investigate the impact of financial leverage on firms’
performance in the Oil and Gas industry of Pakistan which plays a significant role in the
growth and development of the country. This industry is the major concern of the study. This
sector has a major contribution in the development and growth of manufacturing, services
and trading industries of Pakistan. It is contributing distinctive share in Annual GDP growth
of the country. The major aim of the study is to evaluate and observe the impact of financial
leverage on performance of the firms in Oil and Gas sector. And investigate that whether
leverage has significant impact and nature of their relationship.
Research has been conducted by taking the companies from Oil and Gas sector which are
listed at Karachi Stock Exchange of Pakistan including exploring and marketing segment of
the industry. For the research, random selection of 12 firms was done as primary data while
secondary data was collected from the annual reports of the firms for the period of 2010-
2014.
The general trend about the financial leverage is that it has positive impact on the
performance of the firms. The results of the study showed that financial leverage has
significant negative correlation with the selected performance indicators which were ROA,
ROE and NPM. It depends upon the country’s economic condition and particular industry
forces. The results of the study are not generalized to the other industries and firms ignored in
this research.
