Impact of Macroeconomic Conditions, Industry Attributes and Firms Related Variables on Capital Structure: A Cross Industry Analysis

Abstract

Purpose: This study is conducted to examine the main strength of firms’ specific variables, industry effects and macroeconomic conditions in predicting the capital structure choices of non financial listed companies of Pakistan Stock Exchange (PSX-100). Design/Methodology/Approach: To perform the study, a sample of twelve sectors covering a period from 2012 to 2017 is taken from PSX-100. Seemingly Unrelated Regression (SUR) model is applied to explore the capital structure choices. Results of study indicate that the short term debt plays a major part in designing the capital structure of listed companies of PSX-100.
 Findings: Macroeconomic conditions have been identified to cause an increase in financial distress and costs of debt unanimously. The financial distress and costs are significant in financial market developments for a time horizons.
 Implications/Originality/Value: The development in financial markets can have an opportunity to increase the choice of capital structure of firms optimistically. It is explored that source of capital choice seems to decrease in agency behavior and risk due to refinancing. The less agency problem and less risk provide better choice of debt and future growth to the financial market. The growth environment is life blood of financial market and economy.