We examine the impact of debt ratios on returns on equity based on panel data for 179 companies from the non-financial corporate sector of Pakistan for the years 2000 to 2015. The least squares fixed effects estimator reveals that the debt ratio has a significant positive effect on return on equity up to an optimal debt level of 40 percent beyond which it has a significant negative effect.
Panel data, Debt financing, Profitability, Pakistan, Non-financial firms
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Tauseef, S., & Lohano, H. D. (2017). Capital structure and profitability of firms in the corporate sector of Pakistan. Business Review, 12(1), 50-58. Retrieved from https://ir.iba.edu.pk/businessreview/vol12/iss1/3
December 21, 2020