Determinants of Capital Structure in Cement Sector of Pakistan “An Empirical study of Pakistan’s Cement Sector”
Author: Zaheer Ahmed

The study examined the impact of capital structure determinants on the borrowing behavior of the Cement Sector in Pakistan. Different theories of capital structure are reviewed such as trade-off theory, pecking order theory, and agency cost theory in order to formulate testable propositions concerning the determinants of capital structure of Pakistan’s Cement Sector. The analysis is performed using linear Trend analysis technique for a sample of 20 companies of Pakistan’s Cement Sector during 2006-2015. The linear trend analysis shows that whenever the firms generate more revenue uses more leverage. On the other hand, firms generate higher profits uses equity financing instead of debt financing. Both of these are conflicting results because it also implies that growth of firm and profitability of a firm may be negatively associated, which was not measured in this study. It is also concluded that larger firms can obtain higher returns compared to small firms, most likely due to diversification of investment and economic scale. Similar to profitability, large firms use equity financing instead of debt financing. On the other hand, firms that use more short-term debt because of liquidity constraints. This ensures that smaller firms may need debt financing, especially in their initial days. Tangible assets are used as collateral, which can only be possible when firms grow large or these firms have enough financing to show as collateral or they have other businesses as well. Supervisor:- Muhammad Ali Kemal

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Keywords : Capital Structure, Leverage, Long term debt (LTDR), Short term debt (STDR)
Supervisor: Muhammad Ali Kemal

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