Determinants of Debt Financing and Their Moderating Role to Leverage-Performance Relation: An Emerging Market Review

  •  Muhammad Qamar    
  •  Umer Farooq    
  •  Hamayun Afzal    
  •  Waheed Akhtar    


This study explored the determinants of debt financing and their moderating role to the leverage-performance relation in case of 304 Pakistani Nonfinancial firms listed with the Pakistan Stock Exchange. Results revealed that larger, high liquid and more tangible firms deployed least debt ratio on average, while less liquid and less tangible firms did conversely. It is also found that more debt borrowing by less liquid firms and less borrowings by larger and more liquid firms is not favourable decision and managers need to revise their financing policy. The results also suggested that debt borrowings least affect firms’ profits for larger, high liquid, less tangible and high growth oriented firms. Hence, this research provides practical solutions for financial managers by exploring if managers are following right mix of securities and when debt borrowings is a most favourable option of financing.

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