Nadeem Ahmed Sheikh

The objective of this study is to investigate which of the two competing theoretic frameworks; pecking order theory (POT) or trade-off theory (TOT); better explains the corporate leverage behaviour in Pakistan. For this purpose, we use fixed effects model on a large unbalanced panel data comprising of 13,026 firm-year observations of non-financial firms listed on Karachi Stock Exchange Pakistan during 1972-2010 Our results indicate that leverage has two pervasive and significant relationships. First, leverage is negatively related to current and past profitability. Second, leverage is positively related to past dividends. In addition, empirical results present a reasonable support to POT regarding growth. However, POT gets nominal empirical support in Pakistan regarding firm size. The results of this study will help the corporate managers to better formulate the leverage policy.

PurposeThe 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/approachMultiple 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.FindingsThe 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 implicationsThe 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/valueThis research contributes to the literature by illuminating the significant links between some corporate governance measures and capital structure choices of firms in Pakistan.

Purpose The purpose of this paper is to investigate how conventional and Islamic commercial banks in Pakistan choose their capital structure and what are the most significant factors that affect their choice of capital structure. Design/methodology/approach The authors collected the data from the annual reports of commercial banks listed on Karachi Stock Exchange Pakistan during 2004-2014. Panel data techniques, namely, pooled ordinary least squares, fixed effects and random effects, were used to estimate the relationship between book leverage and bank-specific variables such as profitability, size, growth, tangibility and earnings volatility. Findings Descriptive statistics indicate that conventional commercial banks are more levered than Islamic commercial banks. Moreover, conventional commercial banks are larger, profitable and have relatively safe earnings than Islamic commercial banks. In contrast, Islamic commercial banks have relatively more fixed operating assets and growth ...

ABSTRACT This article aims to investigate whether corporate income taxes affect the capital structure of nonfinancial firms listed on Karachi Stock Exchange Pakistan during 1972–2010. Empirical results suggest that taxes are positively related to total debt ratio and short-term debt ratio, whereas they are negatively related to long-term debt ratio. The negative relationship between taxes and long-term debt ratio appears illogical considering the tax advantage of debt in the presence of the corporate income tax. However, the observed crowding-out of corporate debt financing due to the presence of nondebt tax shields provides some logic on the demand side. While on the supply side the banks shy away from long-term debt in peculiar socioeconomic realities of Pakistan. The mixed relationships of corporate income tax with different measures of capital structure partially confirm the prophecy of trade-off theory in Pakistan. In addition, we find that other firm-specific variables which appear to significantly influence the capital structure choice of firms are profitability, collateral value of assets and firm size.

ABSTRACT This article aims to investigate whether corporate income taxes affect the capital structure of nonfinancial firms listed on Karachi Stock Exchange Pakistan during 1972–2010. Empirical results suggest that taxes are positively related to total debt ratio and short-term debt ratio, whereas they are negatively related to long-term debt ratio. The negative relationship between taxes and long-term debt ratio appears illogical considering the tax advantage of debt in the presence of the corporate income tax. However, the observed crowding-out of corporate debt financing due to the presence of nondebt tax shields provides some logic on the demand side. While on the supply side the banks shy away from long-term debt in peculiar socioeconomic realities of Pakistan. The mixed relationships of corporate income tax with different measures of capital structure partially confirm the prophecy of trade-off theory in Pakistan. In addition, we find that other firm-specific variables which appear to significantly influence the capital structure choice of firms are profitability, collateral value of assets and firm size.

Purpose – The aim of this empirical study is to explore the factors that affect the capital structure of manufacturing firms and to investigate whether the capital structure models derived from Western settings provide convincing explanations for capital structure decisions of the Pakistani ...

ABSTRACT 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 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 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.