DETERMINANTS OF FINANCIAL LEVERAGE: AN EMPIRICAL EVIDENCE FROM PAKISTAN STOCK EXCHANGE (original) (raw)

The current study aimed to investigate the impact of several factors i.e. profitability, tangibility, size, growth, financial risk, liquidity, tax shield on firm’s financial leverage. The data was collected for a panel of 83 companies from 6 high performing sectors of Pakistan stock exchange from 2006 to 2016. The results of panel data analysis were compared for random effect, fixed effect and pooled regression models. The findings revealed that Profitability, Tangibility, Firm Size, Liquidity, Tax Shield and Tobin’s Q had a significant role in leverage decision of the sample firms while financial risk, business risk and growth were found to be insignificant. The fixed effect model was found to be more appropriate to explain the relationships. The implications of the results were also mentioned

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