Effect of Financial Gearing and Financial Structure on Firm’s Financial Performance Evidence from Pakistan


Authors : M. Naeem Iftikhar; Dr. Salman Masood

Volume/Issue : Volume 6 - 2021, Issue 9 - September

Google Scholar : http://bitly.ws/gu88

Scribd : https://bit.ly/3lgnMso

Finance has utmost importance like blood for any company. However, better utilization of funds, resources or use of debt / equity mixture smartly, has remarkable influence on organization’s financial performance. Better implementation of gearing strategy moderates the risk and improves operational efficiency as well as maximizes shareholders’ wealth. The key concept is to explore how financial gearing and financial structure affect financial performance along with their link between each other by observing the 12 publicly trading textile companies registered in the PSX having time span from 2011 to 2020. The study used quantifiable approach together with multivariable regression models to analyze the assumptions. Outcomes as a whole demonstrates that when there is no downturn economically in the country, low levels of gearing inclined towards high margins of profit along with high return on equity and assets also. Those external borrowings which are an integral part of gearing should less depend but more concentrate to develop strategies internally in order to enhance the company’s financial performance. This study also provide confirmation by estimating different veracities that the key components of the Pakistani textile companies to develop their operational and financial performance by using the gearing strategy might reap maintainable imminent development.

Keywords : Financial Structure, Gearing, Firm performance & value, Shareholder’s Wealth

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