The Impact of Banking Sector Development on Capital Structure of Non-financial Sector Firms in Pakistan

Abstract

Objective: This study exemplifies how banking sector development influences capital structure of non-financial Sector firms. Methodology: In this study, deductive approach has been used and capital structure used as explained variable. Banking sector development used as explanatory variable and proxies by five key ratios. The six years data ranges from the year 2010 to 2015 used and fixed effect model applied for regression analysis. Findings: The statistical results indicate that first and 4th hypotheses partially accepted while second and third hypotheses fully rejected. The results of study recommend financing policy for finance mangers to consider banking sector development while deciding capital structure. Originality: This study may mark as first study in Pakistan which checks the regression among discussed variables and also the behavior of change.

Do the macroeconomic factors influence the firm's investment decisions? A generalized method of moments (GMM) approach

“…These proxies are well known and determined by The World Bank known as world development indicator (WDI) or macroeconomic factors 4 . Moreover, the previous studies have also considered these proxies as macroeconomic factors (Farooq et al, 2018; Konara & Wei, 2016; Mahmud, 2003; Onwe & Olarenwaju, 2014; Wuhan & Khurshid, 2015). Above of these, this study carried some firm‐specific variables, which may determine the corporate investment, that is, leverage (total debt to total asset), profitability (EBIT/total asset) and firm size (log of total sales).…”

“…The sensitivity of corporate investment decision linked with both firm specific variables, that is, leverage (Bhagat, 2013; Mondosha & Majoni, 2018), firm size (Hamzah, 2017) and profitability (Pacheco, 2017) and macroeconomic conditions such as inflation rate (Onwe & Olarenwaju, 2014), interest rate (Wuhan & Khurshid, 2015) GDP growth rate, financial sector development (Khan et al, 2018) and foreign direct investment (FDI) (Konara & Wei, 2016). The literature is scarce on the effect of GDP growth rate, financial sector development and FDI on investment decision but other corporate factors showed the responsive behaviour towards GDP growth rate (Mahmud, 2003), financial sector development (Farooq, Ahmed, & Muhammad, 2018) and FDI (Marcin, 2008) which alternatively effect the corporate investment. The abundant literature had discussed the firm specific determinants but studies on macroeconomic variables found rare.…”

Behavioral biases in trade credit policy: does it matter for financial performance?

“…Specifically, this effect can be more pronounced in such economies that have less developed financial sector. This notion was also later supported by Farooq et al. (2018).…”

“…Specifically, this effect can be more pronounced in such economies that have less developed financial sector. This notion was also later supported by Farooq et al (2018). Another empirical study conducted by Boissay and Gropp (2007) suggested the link between trade credit and firm performance.…”

National culture and firm financial performance: A mediating role of firm financing decision

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