IMPACT OF FINANCIAL LEVERAGE ON FIRM’S PERFORMANCE: A CASE FROM PHARMACEUTICAL SECTOR OF PAKISTAN

Abstract

The purpose of current study was to analyze the impact of financial leverage on financial performance of pharmaceutical companies, as financial leverages play a vital role in achieving adequate earning or losses. This was empirical study conducted by using E-views for statistical analysis having sample from listed pharmaceutical companies for the era of 10 years. Financial leverage includes debt ratio, debt equity ratio and equity ratio as independent variables and dependent variable financial performance was measured by ROA, ROE, NPM and PE. The study results specified that equity ratio has a significant relationship with dependent variable ROA ; Debt ratio has significant but negative relationship with NPM while Debt to equity and Equity ratio has statistically significant relationship with ROE, though there is no substantial relationship of financial leverage with dependent variable PE. Finally, the study concluded that financial leverage has significant impact on the performance of pharmaceutical firms of Pakistan.