The Determinants of Capital Structure of Stock Exchange-Listed Non-Financial Firms in Pakistan

Abstract

In this paper, we study the potential determinates of the capital structure of non-financial firms listed on Karachi Stock Exchange. We analyse a sample of 445 firms listed on the KSE for the period 1997-2001. We have chosen tangibility of assets, size, firm growth rate, and profitability as independent variables, and measure their effect on debt/total asset ratio (proxy for leverage). Using the technique of panel data analysis, we observe that of the four independent variables, growth, size, and profitability have significant effect on leverage. However, we do not find tangibility as significantly correlated with leverage.

Keywords: Capital Structure, Pakistan, Panel Data, KSE