Capital structure and firm performance: Evidence from energy sector
By: Rao, Zia-ur-Rehman Huzaifa, Muhammad and Safdar, Raheel
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Material type: 
BookPublisher: Journal of Social and Economic Development Description: 27(3), Dec, 2025: p.846-862.Subject(s): Capital structure, Financial performance, Energy sector, Growth
In:
Journal of Social and Economic DevelopmentSummary: The optimal mix of debt and equity capital is critical for significantly reducing a firm's cost of capital and improving overall performance. This study investigates the impact of capital structure on firm performance in the energy sector, focusing on companies listed on the Pakistan Stock Exchange (KSE-100 index). Using data collected from financial statements and the Pakistan Stock Exchange website from 2011 to 2020, the study employs multiple linear regression analysis to examine the relationship between capital structure and firm profitability. Firm performance is measured using return on assets and net profit margin as key indicators. The findings suggest that the debt ratio has a significant positive impact on firm performance. Firm size and liquidity positively influence financial performance, whereas growth exhibits a negative impact. The positive impact of liquidity and firm size suggests that firms should focus on improving operational efficiency and financial flexibility. The negative effect of growth on firm performance indicates the need for such growth strategies that are aligned with financial sustainability. The study provides key implications for financial decision-makers, policymakers, and investors highlighting the importance of maintaining an optimal debt level to enhance firm profitability and financial stability.-Reproduced
https://link.springer.com/article/10.1007/s40847-025-00442-z
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 27(3), Dec, 2025: p.846-862 | Available | AR138583 |
The optimal mix of debt and equity capital is critical for significantly reducing a firm's cost of capital and improving overall performance. This study investigates the impact of capital structure on firm performance in the energy sector, focusing on companies listed on the Pakistan Stock Exchange (KSE-100 index). Using data collected from financial statements and the Pakistan Stock Exchange website from 2011 to 2020, the study employs multiple linear regression analysis to examine the relationship between capital structure and firm profitability. Firm performance is measured using return on assets and net profit margin as key indicators. The findings suggest that the debt ratio has a significant positive impact on firm performance. Firm size and liquidity positively influence financial performance, whereas growth exhibits a negative impact. The positive impact of liquidity and firm size suggests that firms should focus on improving operational efficiency and financial flexibility. The negative effect of growth on firm performance indicates the need for such growth strategies that are aligned with financial sustainability. The study provides key implications for financial decision-makers, policymakers, and investors highlighting the importance of maintaining an optimal debt level to enhance firm profitability and financial stability.-Reproduced
https://link.springer.com/article/10.1007/s40847-025-00442-z
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