Capital structure and profitability of firms in the
corporate sector of Pakistan

Heman D. Lohano and Sana Tauseef

First published: 26 February 2018


We examine the impact of debt ratios on returns on equity based on panel data for 179 companies from the non-financial corporate sector of Pakistan for the years 2000 to 2015. The least squares fixed effects estimator reveals that the debt ratio has a significant positive effect on return on equity up to an optimal debt level of 40 percent beyond which it has a significant negative effect.

Keywords: Panel data, Debt financing, Profitability, Pakistan, Non-financial firms.

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