Abstract:
Purpose
This empirical study explorethe capital structure and company’s performance of the
Pharmaceutical companies registered on the Pakistan Stock Exchange (PSX 100 Index) for
the period from 2006 to 2015. Moreover, this study also examines the relationship between
the capital structure and the company’s performance.
Methodology/ Sample
Capital structure is denoted by two variables, they are (i) debt ratio (DR) (ii) debt to equity
ratio (DE). Firm’s performance is represented by four variables, they are (i) return on assets
(ROA) (ii) return on equity (ROE) (iii) earnings per share (EPS) (iv) net income (NI). This
empirical study uses the secondary data obtained from the six pharmaceutical firm’s listed in
PSX.
Findings
The correlation of coefficients between the variables of capital structure and company’s
performance represent there is a linkageamong the capital structure and the performance of
the companies. In addition, the findings of this empirical study showed that debt ratio has
negative significant relationship with ROA, ROE, and EPS & NI. But debt to equity ratio has
positive significant relationship with the NI, ROE and insignificant relationship with ROA
and EPS.
Practical Implications
This study will help the pharmaceutical companies better know how about their sectors
performance overall. This study will help the management of the companies to get the most
recent knowledge and make decision accordingly to gain profits and slow down their costs
