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Evidence of Capital Structure Discipline in Financial Markets: A Study of Leasing and Insurance Companies of Pakistan

Author Affiliations

  • 1 Faculty of Management and Human Resource Development, Universiti Teknologi Malaysia, Johor Bahru, MALAYSIA

Res. J. Management Sci., Volume 2, Issue (1), Pages 7-12, January,6 (2013)

Abstract

This paper examines the explanatory power of optimal capital structure theories. The study extends empirical work on capital structure determinants of leasing and insurance companies of Pakistan over the period of ten years from 2001 to 2010. The study presents evidences on financial sector determinants with respect to capital structure. Findings of the study validated that both static trade-off theory and pecking order theory are pertinent to financial sector of Pakistan; in particular leasing and insurance sectors. Results for insurance and leasing companies in terms of profitability and liquidity have predicted pecking order theory; whereas, static trade-off model is predicted the financial behavior of firms in terms of size, tangibility and growth.

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