Relationship between Financial Leverage and Financial Performance (Evidence of Listed Chemical Companies of Pakistan)

Abstract

Chemical industry is one of the most Important and main industry of Pakistan. Many local and Multinational companies are producing chemical products which not only cater the local needs but also earn profitable returns as a result of International exports. A general concept exists that financial leverage has significant impact on the financial performance of the companies. This study is also conducted to find out the relationship between financial leverage and financial performance of listed chemical companies of Pakistan. The results of the study show a positive relationship between financial leverage and financial performance by accepting alternate hypothesis H1 and rejecting null hypothesis Ho. Hence chemical sector companies can enhance their financial performance and profitability margins by having a significant proportion of leverage in their capital structures.

Keywords: Financial Leverage, Financial performance, financial ratios, Chemical sector companies in Pakistan