Navigating Debt Sustainability: An In-Depth Analysis of Debt Coverage and other Performance Drivers in Pakistani Textile Sector

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Muhammad Rafay
Shaukat Hayat
Muhammad Idrees
Madiha Aamir

Abstract

Our research sought to ascertain the impact of capital structure, particularly debt financing, on firm liquidity using panel data of 91 Pakistani textile companies from 2017 to 2021. Data was collected from balance sheets of the interested firms which are available at web-site of State Bank of Pakistan (SBP). A well-known econometric technique known as 'Panel Corrected Standard Error (PCSE)' has been employed to acquire precise coefficient values of the interested variables. Findings of the current study demonstrate that Debt Coverage Ratio (DCR) has a significant association with Current Ratio, Return on Assets, Financial Leverage, and Business Growth. Though, Tobin’s Q, Firm age and Firm size have shown insignificant association with DCR. So, present study contributes to the understanding of capital structure choices and financial well-being within textile industry sector of Pakistan. Moreover, our study highlights the trade-off between leverage and financial stability; indicating the role of growth with debt management. These findings offer valuable insights for investors, lenders, and corporate decision-makers.

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How to Cite
Muhammad Rafay, Shaukat Hayat, Muhammad Idrees, & Madiha Aamir. (2023). Navigating Debt Sustainability: An In-Depth Analysis of Debt Coverage and other Performance Drivers in Pakistani Textile Sector. Harf-O-Sukhan, 7(3), 608-618. Retrieved from https://harf-o-sukhan.com/index.php/Harf-o-sukhan/article/view/934