Capital Structure as Driving Force of Financial Performance: Case of Energy and Fuel Sector of Pakistan

Abstract

Choosing the appropriate mix of various short and long-term sources of funds, stands among ISSN 2162-3082 2017 the acute decisions to be taken by management of the firms to form elementary suitability for investment and other decisions. Literature is lacking in consensus pertinent to impact of capital structure on financial performance of the firms. This study intends to investigate the impact of capital structure on financial performance of fuel and energy sector of Pakistan taking into account secondary data from 2006-14. Empirical results of renowned econometric model multiple regression revealed that there is a significant negative impact of capital structure on ROA and ROE of firms in fuel & energy sector of Pakistan, while EPS is least driven by capital structure parameters, only the size has significant positive bearing on EPS. The research findings provide suggestions to policy makers and administrators to rely on equity financing rather debt ethos in order to mitigate the default risk exposure. International Journal of Accounting and Financial Reporting

Asset Turnover, Capital Structure and Financial Performance Consumption Industry Company in Indonesia Stock Exchange

“…Hypothesis (H 1 ) is accepted. The results of this study support the results of research conducted by Murtadlo et al, (2014), Nainggolan and Pratiwi (2017), Pramesti et al, (2016), Liaqat et al, (2017), and Iqbal (2016) which states that the capital structure influences financial performance. Results of hypothesis (H 2 ) liquidity on financial performance analysis results (H 2 ) Liquidity (CR) has a value of t count > t table , which is 3.857 > 1.990 with a significance value of 0.000.…”

“…The results of research conducted by Murtadlo et al, (2014), asset structure has a significant influence on profitability (Rahmiyatun and Nainggolan, 2016) stated that the variables DER, TATO, and Firm Size have significant effect on ROA (Pramesti et al, 2016). Liaqat et al, (2017), and Iqbal (2016) which states that the capital structure influences financial performance. Capital structure refers to how firm investment is financed using either equity or debt or proportionate mix of both (Sarlija and Harc, 2012;Ghasemi and Ab-Razak, 2016;Vy and Nguyet, 2017;Olusuyi and Felix, 2017;Burksaitiene and Draugele, 2018).…”

“…Market realization of the consumption industry sector in 2018 with a value of 1.426,822,476,816,590 rupiah with a percentage of 21.58% (Financial Services Authority, 2018). While there is a significant negative impact of capital structure on return on assets (ROA) in fuel companies and the energy sector in Pakistan (Liaqat et al, 2017). Murtadlo et al (2014) state that the capital structure and asset turnover have a significant effect on financial performance, while the asset structure has no effect on financial performance.…”

Relationship between Ownership Structure and Capital Structure

“…Many researchers from all over the world have studied particularly on the capital structure to measure the impact of debt policy and firm performance (Abor, 2005;Muchiri, Muturi, & Ngumi, 2016;Sadeghian, Latifi, Soroush, & Aghabagher, 2012;Salim & Yadav, 2012). Some studies found a positive impact on capital structure and firm performance (Abor, 2005) and some studies found negative effects between profitability and leverage (Liaqat et al, 2017;Tsuruta, 2017;Vithessonthi & Tongurai, 2015). So, we can formulate the following hypothesis:…”

Discovering Capital Structure Determinants for SAARC Energy Firms

“…Remarkably, the exploration of capital structure determinants for the energy sector firms which are functioning in the territory of South Asian Association for Regional Cooperation (SAARC) is still an unresolved problem. Clearly, the former investigations which were performed in the SAARC context are country and sector-specific (see Chakrabarti and Chakrabarti, 2019;Ghani and Bukhari, 2010;Liaqat et al, 2017), thus, not delivering holistic and conclusive findings for the entire region. Evidently, South Asia is among one of the main regions of the globe which is facing energy scarcity issues (Rahman and Velayutham, 2020).…”