EMPIRICAL ANALYSIS OF LEVERAGE DECISIONS IN PYTHON WITH EVIDENCE BASED ON NON-FINANCIAL FIRMS OF PAKISTAN

Abstract

In this paper, the effect of asset tangibility, profitability, firm size, and anticipated growth on financial leverage associated with the capital structure decisions of non-financial firms listed in the Pakistan Stock Exchange between the years 2010 and 2014 are investigated. A random effects regression model was used after the results of Hausman test using panel data of 13 firms in oil and gas industry. Diagnostic tests found that there was no autocorrelation, heteroscedasticity, and non-normality, therefore, proving the model reliability. The findings indicate that asset tangibility had positive and significant effect on leverage with profitability and expected growth having with negative effects on leverage as the pecking order theory suggests. In particular, the coefficients of what were found to be influential were tangibility and profitability with 0.51 and -0.52, respectively. Firm size did not have a meaningful performance. The model has the capacity to explain about 71 percent of whether or not to engage in leverage decisions. These conclusions underline the importance of firm-specific differences in the development of financing strategy and set up some practical suggestions to financial managers working in emerging markets.