Open AccessThe Determinants of Capital Structure of the Chemical Industry in Pakistan
Author(s) -
Muhammad Rafiq,
Aqsa Iqbal,
Muhammad Atiq
Publication year - 2008
Publication title -
the lahore journal of economics
Language(s) - English
Resource type - Journals
eISSN - 1811-5446
pISSN - 1811-5438
DOI - 10.35536/lje.2008.v13.i1.a6
Subject(s) - capital structure , tax shield , profitability index , panel data , leverage (statistics) , variables , chemical industry , regression analysis , fixed effects model , econometrics , moderation , economics , debt , business , monetary economics , finance , statistics , public economics , engineering , mathematics , tax reform , environmental engineering , gross income , state income tax
This study is an attempt to determine the capital structure of listedfirms in the chemical industry of Pakistan. The study finds that bystudying a specific industry's capital structure, one can ascertain uniqueattributes, which are usually not apparent in the combined analysis ofmany sectors as done by Shah and Hijazi (2004). This study analyzed 26 of39 firms in the chemical sector, listed at the Karachi Stack Exchange forthe period 1993-2004 using pooled regression in a panel data analysis. Sixregressors i.e. firm size, tangibility of assets, profitability, income variation,non-debt tax shield (NDTS) and growth were employed to examine theireffects on leverage. The results show that these six independent variablesexplain 90% of variation in the dependent variable and, except for firmtangibility, results were found to be highly significant. The study has policyimplications of importance for researchers, investors, analysts andmanagers.