Impact of Financial Leverage on Firm Performance Textile Composite Companies of Pakistan

Main Article Content

Umer Iqbal
Muhammad Usman


The aim of this research is to identify the relationship between financial leverage and the performance of Textile Composite Companies of Pakistan. Pakistan Textile Composite Companies which are listed in PSX (100-index) are selected.5-year data is collected from 2011-2015 and top 16 companies are selected as a sample. Using descriptive statistics, correlation analysis, and a regression model to identify the results. Results show that financial leverage has a negative and significant effect on firm ROE and financial leverage has a positive and significant effect on firm ROA. Further study indicates that the high-interest rate and more amount of debt decrease the value of equity and has a negative impact on firm performance. On the other hand, the amount of debt has a positive impact on firm ROA. Results show that financial leverage has a positive impact on firm performance if the amount of debts do not exceed the amount of equity.


Download data is not yet available.

Article Details

Iqbal, U., & Usman, M. (2018). Impact of Financial Leverage on Firm Performance: Textile Composite Companies of Pakistan. SEISENSE Journal of Management, 1(2), 70–78.
Research Articles

Copyright (c) 2018 Umer Iqbal, Muhammad Usman

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Ahmed Nawaz,Salman ATIF. (2015). Impact of financial leverage on firm profitability.

Astawa Putu,Sudika Putu. (2015). Intangible capital and leverage to improve financial performance. Social and Behavioral Science, 7. DOI:

Awais Mustabsar, Iqbal Wateen. (2016). Impact of Capital Structure on firm Performance.

Kabajeh Majid, N. F. (2012). The Relationship between the ROA, ROE and ROI Ratios with Jordanian Insurance Public Companies Market Share Prices . International Journal of Humanities and Social Science, 6.


mahira, R. (2011). Effect of profitability and financial leverage on capital structure. Economic and Finance, 8.

Muammar, H. M. (2014). Influence Analysis of Return on Assets (ROA), Return on Equity (ROE), Net Profit Margin (NPM), Debt To Equity Ratio (DER), and current ratio (CR), Against Corporate Profit Growth In Automotive In Indonesia Stock Exchange . International Journal of Academic Research in Business and Social Sciences , 14.

Mubin Muhammad, I. A. (2014). Determinant of Return on Assets and Return on Equity and Its Industry Wise Effects: Evidence from KSE (Karachi Stock Exchange). Research Journal of Finance and Accounting , 11. DOI:

Opter Tim, H. (2009). The Debt-Equity Choice. Journal of Financial and Quantitative Analysis.

Rabbani Mahboob, Subhan Iqra. (2015). Impact of financial leverage on pakistani firms. Investment and development.

Richard M. Burton, J. L. (2002). Return on Assets Loss from Situational and Contingency Misfits. Management Science, 25. DOI:

Tugas, F. C. (2012). A Comparative Analysis of the Financial Ratios of Listed Firms. International Journal of Business and Social Science , 18.

Ucal, Meltem, Oksay Serhan. (2011). The Solvency Ratio of External Debt (SRED) as an Indicator of Debt Crisis: The Case of Turkey. international journal of economics and research, 7.

Vale, B. (2011). Effects of higher equity ratio on a bank’s total funding costs and lending . 17.

William H, Beaver, Stephen G. Ryan. (2012). Biases and Lags in Book Value and Their Effects on the Ability of the Book-to-Market Ratio to Predict Book Return on Equity . journal of Accounting Research, 23.

Yang Ruili,Xia Kue. (2016). Venture capital, financial leverage and enterprise performance. Social and Behavioural Science, 7. DOI: