Determinates of capital Structure: A case from Pakistani Textile Industry

Abstract

This paper focuses on the determinants of capital structure which specifically comes under the broad category of firm's specific factors. As a lot of theoretical work on capital structure has been done in Pakistan but still there is a lacking in to the insight of how actually should the capital structure be and how capital structure decision are attached to its determinants especially in the Textile sector . Based on the research work done by Hij azi & Tariq (2006) the explana tory variables chosen by us are Tangibility of assets, size, growth and profitability of the firm. We have also compared our results wi th Shah & Hijazi (2005 ) who analyzed 445 non financial firms listed on the KSE representing different industries whereas our paper investigates 155 firms from the Textile industry using pooled regression model. From our resul ts we concluded that size, growth , profitability and tangibility have little impact on the choice of capital structure in the textile industry of Pakistan. Also growing firms in the textile industry of Pakistan use more equity to finance new projects rather than debt .