Abstract:
Purpose: This study analyzes the bond between dependent variable (leverage) and Independent
variables that are earning volatility, growth, tax rate, tangibility of assets, firm Size, and
profitability, and how it affects any firm in terms of its capital structure.
Methodology: This research is done to find the impact of determinants on capital structure
decisions. There are total 12 companies of oil sector of Pakistan which were selected, listed in
KSE. The time period which is selected for this study included data from 2006-2011. To analyze
this research, ANOVA, Regression, Coefficient, and Coli linearity test are applied.
Findings: The results drawn from this research proves that leverage is positively correlated with
profitability, growth and tangibility. And if we look opposite scenario, in which firms size,
earning volatility and tax rate has a negative relationship with leverage. From regression results
it shows that there is 42.7% impact of independent variables on dependent variables.
Practical Implications: This study might help finance decision makers, economic and finance
students, to understand the importance of determinant variable in making optimal capital
structure of any firm. This study helps in order to give clear view of oil sector’s capital structure.
