CAPITAL STRUCTURE EFFECTS ON FIRM PERFORMANCE: EVIDENCE FROM PANEL DATA IN PAKISTAN

Abstract

This study examines the influence of capital structure on company’s performance and focuses on return on assets (ROA) and return on equity (ROE), while considering control variables such as total assets, Taxes, and firm size. Using data from 52 companies traded during the period from 2015 to 2023 on the Pakistan Stock Exchange, the research employs methodologies including general method of moments (GMM) and correlation analysis. The analysis reveals significant positive relationships between various components including long-term debt, and short-term debt with both ROA and ROE. Control variables such as total assets, Taxes, and firm size also exhibit significant impacts on both ROA and ROE. These findings give useful information for financial managers, policymakers, and investors, stressing the need of optimizing decisions to improve long-term operating success in the company context.