Determinants of Leverage listed Chemical Sector Firms at Pakistan Stock Exchange

Abstract

This study investigates the determinants of leverage of listed firms in the chemical sector of Pakistan. Current ratio, Growth, Asset Tangibility, Return on equity and Firm size are used as independent variables and Leverage as a dependent variable. The sample included data for nine firms in the chemical sector, listed on Pakistan Stock Exchange for the period of 2010- 2015 using Correlation and Simple Regression method in a cross-sectional data analysis. Our results show that all these factors affect the leverage of the firm up to some extent. Results found that Growth, Asset tangibility and Return on Equity have positive relationship with leverage which support the predictions of Static Trade off theory. While Current ratio and Firm size was found to have negative relationship with leverage of these firms. Growth had positive relationship with leverage that supporting the simple version of Pecking Order Theory.