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The Moderating Role of Debt Financing in the Relationship between Leverage and Performance

Organization Theory Review

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Field Value
 
Title The Moderating Role of Debt Financing in the Relationship between Leverage and Performance
 
Creator Ummara Fatima
 
Subject leverage
performance
textile sector
 
Description The study examines how debt financing affects the leverage and performance relationship of the textile sector of Pakistan. The study also strives to elaborate the determinants of debt financing. Data has been collected from the annual reports of the textile companies listed at Pakistan Stock Exchange (PSE) for the years 2010-2015. Panel data techniques including Pooled OLS, Fixed Effect model, Random Effect model, and Moderated Panel Regression model were used for estimating the relationship between debt ratio, leverage and company-specific variables such as profitability and size. The results depict that the listed textile companies of Pakistan financed more than half of its assets by external borrowing. There is high asset tangibility in the Pakistani textile industry. The tax shield, which is the alternative of depreciation, is limited for the textile firms of Pakistan (Qamar, Farooq, Afzal & Akhtar, 2016).The independent variables’ interaction term with debt ratio shows a positive relationship with ROA other than asset tangibility. The trade-off theory suggests to follow a targeted optimal capital structure which is more favorable for a firm. Pakistani textile industry should adopt the model of optimal capital structure for balancing the costs and benefits.Keywords: , 
 
Publisher School of Professional Advancement, University of Management & Technology, Lahore, Pakistan
 
Date 2018-04-04
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://journals.umt.edu.pk/index.php/OTR/article/view/203
10.32350/OTR.0201.01
 
Source Organization Theory Review; Vol 2 No 1 (2018): Spring Issue; 01-15
2221-2876
 
Language eng
 
Relation https://journals.umt.edu.pk/index.php/OTR/article/view/203/195
 
Rights Copyright (c) 2018 Organization Theory Review (OTR)