DETERMINENTS OF CAPITAL STRUCTURE OF CEMENT SECTOR IN PAKISTAN

Abstract

This research aims to find out the Capital Structure determinants and their relationships in listed firms of Pakistan cement industry. Due to a capital-intensive industry, requirement of huge funds emerged to organize a business and for further expansion of its capacity. Capital structure of Cement industry shows unique features. We took debt ratio to examine the impact of high or low ratio on overall capital structure. We measure debt ratio’s impact through measuring its impact on 7 variables i.e. taxability, liquidity cost of debt, growth, tangibility, dividend and profitability. The study selected 18 firms in the cement sector out of 22, mentioned and registered in the Karachi Stock exchange, and the data has been analyzed for the period 2008 to 2013 using panel least square method of regression .Following results are achieved from the research and shown in the paper. The independent variables including liquidity, profitability and COD have a significant impact and negatively related with debt ratio, that means if these variables increase debt ratio will go decrease. Other variable including tax and growth also have significant impact and a positive relationship that means if these two variables increase, debt ratio will decrease. The remaining three variables size tangibility and dividend has no significant impact on debt ratio that means there would be no impact of any change occurs in these variables on debt ratio.