Impact of Financial Leverage on Firm Performance
Open Access
- 5 May 2018
- journal article
- Published by SEISENSE Private, Ltd. in SEISENSE Journal of Management
- Vol. 1 (2), 70-78
- https://doi.org/10.33215/sjom.v1i2.13
Abstract
The aim of this research is to identify the relationship between financial leverage and the performance of Textile Composite Companies of Pakistan. Pakistan Textile Composite Companies which are listed in PSX (100-index) are selected.5-year data is collected from 2011-2015 and top 16 companies are selected as a sample. Using descriptive statistics, correlation analysis, and a regression model to identify the results. Results show that financial leverage has a negative and significant effect on firm ROE and financial leverage has a positive and significant effect on firm ROA. Further study indicates that the high-interest rate and more amount of debt decrease the value of equity and has a negative impact on firm performance. On the other hand, the amount of debt has a positive impact on firm ROA. Results show that financial leverage has a positive impact on firm performance if the amount of debts do not exceed the amount of equity.Keywords
This publication has 4 references indexed in Scilit:
- Venture Capital, Financial Leverage and Enterprise PerformanceProcedia Computer Science, 2016
- Intangible Capital and Leverage to Improve Financial Performance of LPG Agents in BaliProcedia - Social and Behavioral Sciences, 2015
- Determinant of Return on Assets and Equity and Industry Wise Effects: Evidence from KSE (Karachi Stock Exchange)SSRN Electronic Journal, 2013
- Return on Assets Loss from Situational and Contingency MisfitsManagement Science, 2002