DETERMINANTS OF CAPITAL STRUCTURE IN TEXTILE INDUSTRY OF PAKISTAN

Abstract

Purpose: This study is performed with an objective understand capital structuring process in textiles industry of Pakistan. It also focuses to identify different financing options available to finance managers in textiles industry of Pakistan. It also aims to identify different financial factors that are responsible for variation in capital structuring process of textile firms in Pakistan. Research Methodology: This research study is performed following explanatory research approach to explain and understand the impact of size of firm, earnings, sales growth, tangible assets and lag of financial leverage on financial leverage of the firm. This research study is secondary in nature because in present study already published data is available on selected variables that is extracted from financial statement so of the listed firms in textile industry in Pakistan. In this research study quantitative approach has followed. The targeted population of present research study is composed of listed firms in textile industry in Pakistan with significant level of operations. In this stratified random sampling technique has applied with preconditions that includes that firms is operating for more than one year and listed in Pakistan stock exchange. In this research study a sample size of 8 listed textile firms has selected to gather data on selected variables i.e. size of firm, earnings, sales growth and tangible assets and financial leverage. Findings of the Research: The study revealed that there is significant role of size of firm, earnings and lag of financial leverage in determination of financial leverage of listed firms in textile industry in Pakistan with significance value of 0.000, 0.0036 and 0.0017 therefore significant at 5 percent level of significance hence hypothesis for thesis variables i.e. HI, H3 and H5 are accepted while tangible assets of firms and sales growth has found no significant impact on financial leverage hence hypotheses for these variables i.e. H2 and H4 are rejected. Furthermore it is clearly evident that lag of financial leverage positively determines financial leverage current value with coefficient value of 0.705. Practical Implications: This study provided with useful information to determine the role financial indicators to determine financial leverage position of firm.