Impact of Capital Structure on Firm’s Financial Performance: Cement Industry of Pakistan

Abstract

This research is an attempt to gauge the impact of capital structure (leverage) on the financial performance of companies listed on the KSE in the cement sector. The data was extracted for a period of seven years from 2009 – 2015. The total firms listed in the sector are 18 out of which data for the period selected is available for 14 firms which are used for study. Correlation and Ordinary Least squares models are used in this study for testing the hypothesis. The results show that leverage measured by Debt to Assets has a statistically significant negative impact on firms’ financial performance measured by Return on Assets at 99.9% confidence interval.

Keywords: Financial leverage, Capital Structure, Firms’ performance.