IMPACT OF CAPITAL STRUCTUING ON PROFITABILITY OF CEMENT COMPANIES OF PAKISTAN

Abstract

Purpose: This study is conducted with the objective to define the impact of the capital structuring process on the productivity of the cement industries in Pakistan. The research study aims to examine the direct effect of the variations in the capital structuring process on the earnings capacity of company and its resultant impact on of company’s market position of company. This research work focused on published data resources to perform analysis therefore this research study is secondary in nature. Research Methodology: This study followed explanatory research approach. In this approach deterministic variables are used to describe the behavior of predicate. The targeted segment of current research work is cement manufacturing segment of Pakistan. Sample size of the current research study consists of five cement manufacturing firm of Pakistan that has the majority share of the market. The information is gathered for the duration of 10 annual periods since 2006 till 2015 for selected variables. In this research study official website of the mention cement manufacturing firm are visited and their annual report are used to collect the data. This research work focused on panel linear regression technique is applied to understand the impact of three components i.e. D/E ratios, D/A ratios and interest exposure ratios on the productivity of company operating in the cement industry of Pakistan. Findings of the Research: This work has clearly reported through hypothesis summary findings that a substantial effect of debt to equity proportion on profitability of firms in cement industry of Pakistan at 5 percent level of substantial with significance value 0.000 hence hypothesis HI is accepted. Similarly, there is a substantial impact of interest coverage ratio on the positive earnings of firms within cement manufacturing segment of Pakistan at 5 percent level of substantial with significance value 0.0021 hence hypothesis H3 is accepted while hypothesis H2 revealed that there is a substantial effect of D/A ratio on positive earnings of firm in cement industry of Pakistan at 5 percent level of significance is rejected. Practical Implications: This study clearly indicates that a substantial impact of D/E proportion and interest exposure and role of these ratios to determine the impact on the profit after taxes and improve the functionality of listed firms in cement industry in Pakistan.