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Purpose – The purpose of this paper is to investigate whether capital structure affects the performance of non-financial firms in Pakistan. Design/methodology/approach – Panel econometric techniques namely pooled ordinary least squares (OLS), fixed effects, and random effects were used to investigate the impact of capital structure on performance of non-financial firms listed on the Karachi Stock Exchange Pakistan during 2004-2009. Findings – Empirical results indicate that all measures of capital structure (i.e. total debt ratio, long and short-term debt ratio) are negatively related to return on assets in all regressions. Moreover, total debt ratio and long-term debt ratio are negatively related to market-to-book ratio under the pooled OLS model, whereas these measures are positively related to market-to-book ratio under the fixed effects model. Short-term debt ratio is positively related to market-to-book ratio in all regressions, however the relationship is found insignificant. A negative relationship between capital structure and performance indicates that agency issues may lead the firms to use higher than appropriate levels of debt in their capital structure. This overleveraging may increase the lenders' influence which in turn limits the managers' ability to manage the operations effectively, hence negatively affecting the firm performance. Practical implications – Empirical results indicate that capital structure has material effects on firm performance. Thus, corporate managers should consider the impact of leverage on performance before adjusting the debt levels. Moreover, lenders should tenderly inflict the debt covenants considering their impact on firm performance. Finally, investors should consider the firm's debt level before making investment decisions. Originality/value – This may probably be the first study that explores the impact of capital structure on performance using the most recent data set of Pakistani firms. Moreover, this paper lays some groundwork upon which a more detailed evaluation of Pakistani firms' capital structures and their impact on performance could be based. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to investigate whether internal attributes of corporate governance such as board size, outside directors, CEO duality, managerial ownership, and ownership concentration affect the performance of Pakistani firms. Design/methodology/approach – Panel econometric technique namely pooled ordinary least squares is used to estimate the relationship between internal governance mechanisms and performance measures (i.e., return on assets, return on equity, earnings per share, and market-to-book ratio) using the data of non-financial firms listed on the Karachi stock exchange Pakistan during 2004-2008. Findings – The empirical results indicate that board size is positively, whereas outside directors and managerial ownership are negatively related to the return on assets, earnings per share, and market-to-book ratio. Ownership concentration is positively related to all measures of performance used in this study. CEO duality is positively related to earnings per share only. As far as control variables are concerned, leverage is negatively related to the return on assets, return on equity, and earnings per share. Alternatively, firm size is positively related to all measures of performance. In sum, empirical results indicate that internal governance mechanisms have material effects on firm performance. Practical implications – Empirical results provide support to managers to understand how internal governance mechanisms affect the firm performance. Moreover, results provide support to regulatory authorities for enacting laws to make internal governance mechanisms work more effectively in the country. Originality/value – This paper contributes to the literature by exploring the effects of internal governance mechanisms on firm performance using the data of Pakistani firms. Moreover, empirical findings somehow proceed to confirm that theories of corporate governance surely provide some support to explain the relationship between internal governance mechanisms and firm performance. [ABSTRACT FROM AUTHOR]

Purpose – The aim of this empirical study is to investigate whether corporate governance attributes such as board size, outside directors, ownership concentration, managerial ownership, director remuneration, and CEO duality affect capital structure choices of Pakistani firms.Design/methodology/approach – Multiple regression analysis is used to estimate the relationship between corporate governance measures and capital structure of non-financial firms listed on the Karachi Stock Exchange, Pakistan, during 2004-2008.Findings – The results suggest that board size, outside directors, and ownership concentration are positively related to the total debt ratio and the long-term debt ratio, whereas director remuneration is negatively related. Managerial ownership is negatively related to the long-term debt ratio. CEO duality is found to be highly insignificant in all regressions. Control variables such as profitability and liquidity are negatively related to the total debt ratio and the long-term debt ratio, whereas firm size is positively related. Asset tangibility is positively related to the long-term debt ratio and negatively related to the total debt ratio. Although Pakistani firms have weak internal and external corporate governance mechanisms compared to firms in developed countries, the empirical findings suggest that corporate governance attributes in part explicate the financing behavior of Pakistani firms.Practical implications – The empirical results of this study provide support to corporate managers in establishing an optimal capital structure, and to regulatory authorities for enacting laws and developing institutional support to make corporate governance mechanisms work more effectively in the country.Originality/value – This research contributes to the literature by illuminating the significant links between some corporate governance measures and capital structure choices of firms in Pakistan. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to identify the factors affecting firms' decision to use foreign exchange (FX) derivative instruments by using the data of 86 non-financial firms listed on Karachi Stock Exchange for the period 2004-2007. Design/methodology/approach – Required data were collected from annual reports of listed firms of Karachi Stock Exchange. Non-parametric test was used to examine the mean difference between users and non-users operating characteristics. Logit model was applied to analyze the impact of firm's financial distress costs, underinvestment problem, tax convexity, profitability, managerial ownership and foreign exchange exposure on firms' decision to use FX derivative instruments for hedging. Findings – Results explain that firms having higher foreign sales are more likely to use FX derivative instruments to reduce exchange rate exposure. Moreover, financially distressed large-size firms with financial constraints and fewer managerial holdings are more likely to use FX derivatives. Research limitations/implications – Incomplete financial instrument disclosure requirements restricted researchers to using binary variable as a dependent variable instead of notional value or fair value of derivative usage. Practical implications – The study shows that in the presence of amateur derivative market, Pakistani corporations possessing higher agency costs of debt, agency costs of equity, and financial constraints will benefit more by defining hedging policies coherent with the firm's investment and financing policies in order to enhance firm value. Originality/value – Until now, no earlier empirical study focused on the determinants of a firm's hedging policies in Pakistan, in the presence of volatile exchange rates,. The current study, therefore, attempts to identify the factors which affect the firm's decision to use derivative instruments for hedging FX exposure of non-financial firms in Pakistan. [ABSTRACT FROM AUTHOR]