Open AccessIMPACT OF CAPITAL STRUCTURE ON PROFITABILITY AND EARNINGS OF THE FIRM; A STUDY ON PAKISTANI COMPANIES FROM DIFFERENT SECTORS
Author(s) -
Hasnain Raza,
Faiza Akhtar,
Mohsin Abdur Rehman,
Sehrish Naeem,
Muhammad Fraz Ali
Publication year - 2017
Publication title -
international journal of accounting and economics studies
Language(s) - English
Resource type - Journals
ISSN - 2309-4508
DOI - 10.14419/ijaes.v5i2.8082
Subject(s) - profitability index , hausman test , earnings , capital structure , panel data , sample (material) , business , earnings per share , fixed effects model , regression analysis , economics , finance , econometrics , debt , chemistry , chromatography , machine learning , computer science
Capital structure is the driver of profitability and earnings of any company; therefore the impact of capital structure is analyzed in companies selected from different sectors of Pakistan including public and private sector. The financial data of 22 companies have been observed from 2010-2015. Eviews 8 has been used to analyze the panel regression. The Hausman test confirms that random effect model is appropriate for both ROE and EPS. Findings reveal that DE is insignificantly negatively related to ROE but significantly positively related to EPS where DA is insignificantly positively related to ROE but significantly negatively related to EPS. The policy makers of sample companies should consider the impact of capital structure on EPS.