Business Review

Article Title

Capital structure and profitability of firms in the corporate sector of Pakistan


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.