Static Trade-off theory or Pecking order theory which one suits best to the financial sector. Evidence from Pakistan.

Sehrish Butt, Zeeshan Ahmad Khan, Bilal Nafees


This research is a contribution towards understanding the financial behavior of leasing sector of Pakistan for the period of 2001-2010. It is an attempt to investigate the key factors that influence the capital structure of leasing sector of Pakistan. Financial Leverage is taken as the dependent variable. Whereas, Size of Firm, Capital intensity; Liquidity, Profitability and Tangibility of assets are taken as independent variables. Empirically it has been found that size of assets has a negative and significant impact on leverage. It has also been found that Liquidity, Tangibility, profitability and capital intensity do not significantly influence Leverage. Hence, it is concluded that leasing sector of Pakistan is following Pecking Order Theory in terms of the Size of Firm, Tangibility, liquidity, profitability and capital intensity.


Key words: Leasing, financial sector, Karachi Stock Exchange, Tangibility, Pecking Order Theory, Static Order Theory

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