Impact of Capital Structure on Firm’s Financial Performance: An Analysis of Chemical Sector of Pakistan

Abstract

This article has the intent to scrutinize the impact which capital structure (Financing decisions) have on the financial performance of firms. Data from annual audited reports of the 28 listed firms in Chemical sector of Pakistan at KSE (Karachi Stock Exchange) retrieved for the phase of 5 years (2009-2013). Correlation and Panel least square regression analysis put in use to investigate the tie-up between capital structure and financial performance of firms. The outcome of the statistical analysis made known that TDR and STDA has significant negative influence on the financial performance of firms evaluated by ROA. The relationship in between ROA and TIE is positive as well as significant. However, DER and LTDA have negative but insignificant influence on ROA.

Keywords: Capital Structure, Financial Performance (ROA), Chemical Sector, Pakistan