FINANCING BEHAVIOR OF TEXTILE FIRMS OF PAKISTAN

The present study aims to explore the determinants of capital structure in the textile sector of Pakistan and to examine the effect of these determinants on the composition of capital structure. In this study we analyze different theories related to capital structure, i.e. static trade-off theory, pecking order theory, signaling theory and agency theory. The analysis is performed by means of panel data technique using sample of 102 firms listed on KSE for the period of 2002-2009. Stepwise regression analysis applied on the data available, the results suggest that profitability, tangibility, liquidity and international diversification are negatively related with leverage and are strongly significant. Market share and corporate size are negatively related while inflation related positively with leverage, but are insignificant. The results confirm the pecking order theory and static trade-off approach.