IMPACT OF DEBT ON PROFITABILITY OF FIRMS; EVIDENCE FROM NON-FINANCIAL SECTOR OF PAKISTAN

This study focuseson expanding the existing empirical knowledge on the impact of debt on profitability of companies. Different sets of variables havebeen used to investigate the relationship between debt andprofitability of firms with empirical evidencefrom the non-financial sector of Pakistan; usin...

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Bibliographic Details
Published inCity University Research Journal Vol. 6; no. 1; pp. 70 - 80
Main Authors Habib, Hassan Jan, Khan, Faisal, Wazir, Muhammad Imran
Format Journal Article
LanguageEnglish
Published Peshawar City University of Science & Information Technology 01.01.2016
Subjects
Capital structure
Corporate debt
Costs
Debt financing
Decision making
Equity financing
Financial performance
Financial services
Long term debt
Profitability
Researchers
Short term debt
Stock exchanges
Stockholders
Studies
Variables
Pakistan
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Summary:This study focuseson expanding the existing empirical knowledge on the impact of debt on profitability of companies. Different sets of variables havebeen used to investigate the relationship between debt andprofitability of firms with empirical evidencefrom the non-financial sector of Pakistan; using panel data of 10 years, ranging between 2003-2012. Return on Assets is used as the profitability measure and is the dependent variable, whereas; Short Term Debt to Asset, Long Term Debt to Asset, Total Debt to Asset are used as independent variables, while Size, Sales Growth, and Growth Opportunity are used as control variables. Random effect regression analysis is used to find out the impact of debt on profitability. Results indicate a significant but negative relationship between short term debt, long term debt, total debt, and return on assets.
ISSN:2220-9174
2409-0441