Content Details | NUML Online Research Repository

Title AN EVALUATION OF STOCK MARKET RESPONSE FOR LEVERAGED FIRMS

Author(s) Ms. Shehla Akhtar

Abstract The traditional theories like MM theory in finance believe that the proportion of debt in the capital structure of the firms may not improve the shareholders’ wealth as the firm’s value remains the same due to certain costs of debt keeping other variables constant. Hence, the benefits of leverage may not be realized to the desired extent. Whereas, the tradeoff theory states that the suboptimal level of debt in the company increases the cost of debt than its benefit. The situation may create an adverse impact on shareholders’ value. This study aims to examine the association and influence of financial leverage on stock market response with the control effect of firm size, firm growth, industry, cash flows and corporate earnings in all non-financial sector firms listed at Pakistan Stock Exchange. The stock market response is measured by employing two important factors of the stock market reaction and stock market returns. The research provides a deep insight of investors’ perceptions, their expectation, and fears while making an investment decision in leveraged companies compared and contrasted with the company management’s financing decisions and the ground realities happening at Pakistan Stock Market. The effect of demographic traits of financial and investment decision makers is also measured. At the same time, research contrasts the human perceptions about the influence of leverage on stock market response determined by market reaction and returns, with the historical happenings in reality over the period of time. The study overcomes the gap in the literature by adding a different dimension to view and compare the human perceptions of decision making with the results of the fact sheet and set guidelines for the managers and investors for their

Type Thesis/Dissertation PhD

Faculty Management Sciences

Department Management Sciences

Language English

Publication Date 2019-07-05

Subject Finance

Publisher NUML

Contributor(s)

Format APA

Identifier

Source

Relation

Coverage

Rights