IMPACT OF CAPITAL STRUCTURE ON STOCK RETURN IN THE MEDIATING ROLE OF FIRM PERFORMANCE: A CASE STUDY OF OIL &GAS SECTOR LISTED ON PSX

Abstract

The study objective was to determine capital structure (CS) which is an important factor in capital allocation on stock return (SR) in the mediating role of firm performance (FP) in the context of oil and gas sector of Pakistan. In this study CS has been taken as an independent variable while SR as a dependent variable with a mediating role of FP. Oil and gas sector has been considered as a population and for this purpose the analysis is conducted of 10 oil and gas companies operating in Pakistan on the basis of market capitalization over the period from 2017 to 2021 by using purposive sampling technique. The data have been collected from annual financial reports of oil and gas companies available on PSX, and also from others sources like different articles, journals and thesis. In order to inspect the impact of CS on stock outcomes, the Correlation and regression models have been used to test the results. Overall research of current study shows that there is positive significant effect of CS and SR. Furthermore, mediating variable, FP also having positive significant effect on SR of oil and gas sector of Pakistan. The study is applicable with regards to oil and gas sector of Pakistan since the oil and gas plays vital role for the economy of the country. The current study specify the acknowledgement and grasp about the implementation of CS and the appropriate attentions towards the application of all dimensions for boosting SR of oil and gas sector, Pakistan. This study contributed to the body of knowledge by examining the mediating role of FP between CS and SR. Investors, managers and regulators can obtain further understandings, especially those looking for to improve FP in the emerging markets.