The Impact of Debt Financing on Corporate Financial Performance: An Evidence of Pakistani Non-Financial Listed Firms

Abstract

The aim of this study is to check the impact of debt financing on performance of the firms of non-financial firms constituting Pakistan stock exchange (PSX). The current research study collected secondary data from reports published by State Bank of Pakistan (SBP) for a period of fourteen years from 2005 to 2018. The study sampled 150 firms from non-financial sector of Pakistan Stock Exchange (PSX) using convenience sampling technique. This study used long term debt to total assets, short term debt to total assets, total debt to total assets to measure the debt financing (leverage ratios) and return on assets (ROA) to measure financial performance. To derive the results of the study; descriptive statistics, correlation matrix and ordinary least square (OLS) regression analysis were applied using Eviews9. According to results of the study, the short term, long term and total debt have negatively significant relationship with ROA. Further research studies may take into account the data of financial firms registered on the PSX.