DETERMINANTS AFFECTING THE CAPITAL STRUCTURE DECISION OF A FIRM (A CASE STUDY OF TEXTILE SECTOR IN PAKISTAN)

In this paper, we have examined the influence of specific factors based on a capital structure sample of five Pakistani textile sector (Leveraged) companies. The secondary data came from an analysis of the balance sheets of five companies listed on the Karachi Stock Exchange between 2004 and 2014.Regression and correlation analysis on the panel data shows that profitability is negatively correlated with leverage ratio, while tangibility is positively correlated with leverage ratio, but not significantly. Firm size and firm growth are also positively and significantly correlated with leverage. Return on equity is also negatively correlated with leverage. Our findings also show that large textile firms, compared with small ones, finance long-term through debt. Keywords: Capital Structure, Return on equity, Profitability, Tangibility, Leverage, Debt to equity ratio, Pakistan.