Capital Structure Impact on Financial Performance of Sharia and Non-Sharia Complaint Companies of Pakistan Stock Exchange

Abstract

For a firm to be profitable, it is necessary to create an optimal capital structure that contribute towards desired performance level. This study was conducted to explore the relationship between capital structure and financial performance of firms specifically with respect to shariah complaint and non shariah complaint companies. The analysis was conducted on panel data of 8 companies (3 shariah complaint and 5 non shariah complaint) listed under technology and communication sector of Pakistan Stock Exchange under the period 2009-2015.  Financial Performance was the dependent variable measured by ROA and ROE while capital structure was independent variable measured by indicators, LTDR, STDR, SGR, NDTS and INSHOL. Multiple linear regression and correlation were used as statistical tools to run the model. On the basis key findings we concluded in Pakistan Shariah and non shariah companies have different pattrens of capital structure. We further concluded that capital structure effect the performance of firm in case of non-shariah but do not significantly affect performance of shariah complaint.

Keywords: Capital Structure, Financial Performance, Non- Sharia complaint, Pakistan, Return on Asset, Return on Equity, Sharia complaint, Technology and Communication


Article Review Status: Published

Pages: 54-70 (Download PDF)

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