SAJMS - South Asian Journal of Management Sciences

The Determinants of Capital Structure in Chemical and Pharmaceutical Sector of KSE Listed Companies

This paper presents the determinants of capital structure of Karachi Stock Exchange listed firms in the chemical and pharmaceutical sector. This paper selected four independent variables i.e. size of the firm, growth, profitability and tangibility. A total of 28 major firms listed at Karachi Stock Exchange for the period of J 999-2005 were selected and analyzed. The result of the sample data is consistent with the pecking order model but contradicts the trade-off model i.e more profitable firms use less leverage. This research also shows that leverage is closely related to growth and tangibility of assets which is consistent with the trade-off theory.

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