Unveiling the Changing Capital Structure Dynamics in the Oil and Gas Industry: Evidence from Pakistan

Abstract

Firm-specific considerations impact decisions about capital structure. A few investigations have been done in Pakistan's oil and gas sector. Most studies have examined the effect on non-financial firms and the textile industry. As this sector is very attractive for investors, The influences on capital structure decisions must be considered. In this study, only firm-specific factors are considered for analysis. The effect of asset structure, financial distress (earning volatility), non-debt tax shield, liquidity, firm size, profitability, and firm growth on capital structure decisions are examined. For this, data ranging from 2007 – 2021 of the firms working in Oil and Gas sector of Pakistan was used. The pool regression approach was applied. As per the results, tangibility and liquidity have an inverse relationship; non-debt tax shields and firm size directly affect profitability, and growth does not impact the capital structure.