"CAPITAL STRUCTURE AND ITS DETERMINANTS" A STUDY ON OIL COMPANIES LISTED IN KSE

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.