Capital structure and Leverage

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Influence of Capital Structure on Leverage of Cement Sector in Pakistan

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ACKNOWLEDGEMENT

First of all we would like to thank Allah Almighty for granting us the capability and courage to work on this report with my best efforts, and for the patience and perseverance endowed by Him.
We would also like to thank Mr. H. JAMAL ZUBAIRI for giving us the chance to work on this report and for his guidance, advice and examples during regular sessions which made this report possible.
We would also like to extend our gratitude to the senior students who gave guidance and helped us in this report.
We genuinely hope that this report meets the designated standards and you have a pleasant time going through it.
Thank you.

Abstract
This paper attempts to determine the capital structure of firms in the cement industry of Pakistan. The study finds that a specific industry’s capital structure exhibits unique attributes which are usually not apparent in the combined analysis of many sectors. The study took 5 firms in the cement sector, listed at the Karachi Stock Exchange for the period 1997 to date and analyzed the data by using pooled regression in a panel data analysis. Following the model developed, it has chosen six independent variables i.e. firm size (measured by natural log of sales), tangibility of assets, profitability, growth, quick ratio and non-debt tax-shield and further analyzed their effects on leverage. The results, except for firm size, were found to be highly significant.

Introduction
The firm can choose a mix of financing options to finance its assets so that its overall value can be maximized and this is known as the capital structure of the firm. The market value of a firm is determined by its earning power and the risk of its underlying assets, and is independent of the way it chooses to finance its investments or distribute dividends. A firm can choose between three methods



Bibliography: Shah, Atta, and Hijazi S., 2005, “The Determinants of Capital Structure in Pakistani Listed Non-Financial Firms”, presented at 20th AGM & Conference of Pak Society of Development Economics (Jan. 11, 2005). work allocation:

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