The Impact of Capital Intensity, Size of Firm And Profitability on Debt Financing In Textile Industry of Pakistan

This study focuses on debt financing, being an important source of finance for all long term and short term needs of all the firms of the modern day. The weight of debt financing in capital structures is affected by the profitability and growth of companies. This study attempts to find out the determinants of debt financing in textile sector of Pakistan. For this purpose, three independent variables i.e. capital intensity, size of firm and profitability are taken into consideration to identify their impact on dependant variable i.e. debt financing. The population selected for this particular research is listed textile sector companies at the Karachi Stock Exchange of Pakistan. Convenience sampling has been used to select the companies for which data were available for the period of study. The data collected for this study was taken from annual reports of the selected companies. The study concluded that the proportion of debt financing in capital structures is affected by the profitability, size and capital intensity of the firms in textile sector of Pakistan. Hence the careful decisions ought to be taken in terms of capital structure changes, keeping in view the impact of profitability, size and capital intensity of the firms, which in turn would help in suggesting financial reforms for the sector in future.