Abstract:
Purpose – The aim of this study is to examine the factors that are affecting the leverage for the
company while determining the capital structure of the company and the empirical findings on
the ten non-financial companies from the chemical sector of Pakistan listed in Karachi stock
exchange.
Design/methodology/approach – To find the relation between dependent and independent
variables multiple regression model is used with the help of statistical package for social sciences
SPSS that the factors have an impact on to leverage of the company and hence affecting the
financial performance of the company. Leverage of a company is dependent variable whereas
profitability of the company, growth, tangibility, size of the company, tax and risk are the
independent variables. The sample is based on ten companies of chemical sector of Karachi
stock exchange and the data is analyzed from 2010 to 2014. The data is collected from financial
statements of the companies.
Results – The companies in the chemical sector shows 63% variation because of these
independent variables. The companies mostly dependent on internal source of financing rather
than external source of financing and companies using equity to finance their long term
investment decisions and debt financing is contributing to a very limited extent.
