TY - JOUR
AU1 - Ahsan, Tanveer
AU2 - Wang, Man
AU3 - Qureshi, Muhammad Azeem
AB - PurposeThe purpose of this paper is to find out firm, industry, and country level determinants of capital structure of Pakistani listed non-financial firms.Design/methodology/approachThe authors use a fixed effects panel data model over a 39 years (1972-2010) unbalanced panel data of Pakistani non-financial listed firms to determine the factors that influence capital structure of these firms.FindingsThe authors find that Pakistani firms prefer retained earnings to finance their business projects, and debt is easily available for experienced firms. Moreover, socio-economic collusive networks, poor corporate governance mechanism along with weak legal system provide these firms an opportunity to pass on their risk to the creditors (banks).Research limitations/implicationsThe data set does not contain factors characterizing inter-industry heterogeneity, therefore, the authors use mean industry leverage and mean industry profitability to explore if any relationship exists between leverage of firms, and their respective industry leverage/profitability.Practical implicationsPakistani non-financial firms are highly leveraged increasing their probability to face financial distress in erratic economic conditions. As such, the policy makers need to develop capital markets of Pakistan to enable a resilient corporate capital structure. Further, erratic economic conditions of Pakistan create uncertain business environment yielding short-term opportunities and to finance them Pakistani firms use short-term debt as a main financing source. The policy makers need to improve corporate governance mechanism and strengthen legal system that will go a long way to develop Pakistani capital market on sound and sustainable footing.Originality/valueThis is the first study that uses an extended number of variables and discovers financial behavior of firms in a bank-based economy having limited financing options, and facing erratic economic conditions.
TI - Firm, industry, and country level determinants of capital structure: evidence from Pakistan
JF - South Asian Journal of Global Business Research
DO - 10.1108/SAJGBR-05-2015-0036
DA - 2016-10-17
UR - https://www.deepdyve.com/lp/emerald-publishing/firm-industry-and-country-level-determinants-of-capital-structure-54CXq3UEIQ
SP - 362
EP - 384
VL - 5
IS - 3
DP - DeepDyve
ER -