Impact of Capital Structure on Company’s Financial Performance : A study of Oil and Gas sector of Pakistan

Abstract

The purpose of this research is to empirically explore the impact of capital structure on a firm’s profitability in Oil & Gas Sector exploration and production companies of Pakistan. Sample firms filtered for the study are OGDC, MARI, PPL and POL. The objective of this study is to determine the impact of capital structure on financial performance of oil and gas s sector companies. Annual panel data from 2011 to 2025 is used in this study. For this research, quantitative based analysis mode has employed. To achieve the study outcomes, secondary data was collected from audited annual financial statements of the companies under study, and then evaluated through descriptive statistics and correlation coefficients. During examining data, Debt/Equity Ratio (DE) measures the financing of a firm, and financial performance is proxied by Return on Assets (ROA), Return on Equity (ROE), and Earning Per Share (EPS). These companies have experienced different levels of financial growth and financing decisions, making them suitable cases for the analysis. The outcomes drawn from this study demonstrate mix linkage among numerous dimensions of capital structure of firms and their financial performance relevant in the context of the Oil & Gas sector of Pakistan. We have used random effect panel regression tool in our studies. Results demonstrated that ROA has a negative link with DE, ROE illustrates positive statistically significant association, and EPS shows an insignificant linkage with DE. Fundamentally, this study results cooperated that the sample firms under examination incorporate prompt transformations in their capital mix (debt and equity), which exposed their performance significantly. This analysis suggests the selected companies to deploy a uniform capital mix framework with an evident knowledge of firm’s performance. Furthermore, the study left implications of managers, policymakers, and investors.