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International Journal of Learning & Development ISSN 2164-4063 2014, Vol. 4, No. 2

Impact of Capital Structure on Firms Financial Performance and Shareholders Wealth: Textile Sector of Pakistan

Mubeen Mujahid (Corresponding Author) MS & Research Scholar, Dept. of Management Sciences, Islamia University Bahawalpur E-mail: malikmubeen.awan@yahoo.com Kalsoom Akhtar Visiting Lecturer & Research Scholar, Dept. of Management Sciences, Islamia University Bahawalpur E-mail: kalsoom_2010@yahoo.com Doi:10.5296/ijld.v4i2.5511 URL: http://dx.doi.org/10.5296/ijld.v4i2.5511

Abstract The basic purpose of our research paper is to evaluate the impact of Capital Structure on the Firms Financial Performance and Shareholders Wealth in textile sector of Pakistan. We have conducted the regression analysis on our sample data of 155 textile firms for the year 2006 to 2011. We use the overall textile sector ROA ROE and EPS ratios as accounting measures to evaluate the impact of Capital Structure on Firms Financial Performance and Shareholders wealth. Our results shows that the capital structure positively impact the Firms Financial Performance and Shareholders Wealth. Keywords: Firms Financial Performance, Shareholders wealth, Optimal Capital Structure, Return on Equity, Return on Asset, EPS, Debt to Equity ratio. 1. Introduction In this paper we tried to evaluate the impact of Capital structure on Firm’s Financial Performance and Shareholder’s wealth. In this paper we use two dependent variables (Firms performance, Shareholder's value) to investigate the one independent variable (Capital structure). We tried to analyse the determinants of capital structure and find out the optimal capital structure that increase the value of the firm’s financial performance and shareholder's wealth. First we have to analyse that what it means by Capital Structure. Capital structure of a firm is referred to the Firm’s financing through different sources like Equity (Common and Preferred Equity) and...