Capital Structure and Shareholder's Wealth
RESULTS AND DISCUSSION
Now that we have applied all the tools necessary for hypothesis testing, the final results can be discussed in detail. All variables with respect to their relation to the capital structure will be discussed separately. Not only the figures have been interpreted as per the mathematical rules, but they have also been analyzed according to the prevalent conditions in the cement industry during the period of analysis. Therefore, it is necessary to give the industry scenario before going further with the results and discussion.
CEMENT INDUSTRY DURING 2001 TO 2005
Cement industry has shown a mind puzzling performance during 2001 to 2005, if gazed by the eye of finance. However, an analyst must keep the market and economy in mind before making a final opinion about a sector. As far as financing the assets is concerned, cement firms have resorted to use equity financing for the most part. In only one instance of the sample data, debt has increased past the total assets also. One reason for this equity financing is the reluctance of lenders to give debt to these firms.
We also have to consider the Afghanistan's high demand of cement, which boosted the sales of the cement sector in Pakistan, tremendously. Around 50% of the firms have been able to come up with normal non-negative returns. Other times, firms have also sustained heavy losses. The increase in revenue may be supported as even when the equity has been increasing over the five years, the Return on Equity shows a progressive trend. Given the increase in denominator the firms have surely made huge revenues. Not only had the sales prices increased as per the Law of Demand, but also unit if Sales had increased. Hence, revenues showed a two fold increase.
VARIABLE WISE DISCUSSION OF RESULTS
Capital structure
Capital structure which is my independent variable, only 25% of the sample firms used more equity than debt as funding source. Another 25% used excessively high amounts
Now that we have applied all the tools necessary for hypothesis testing, the final results can be discussed in detail. All variables with respect to their relation to the capital structure will be discussed separately. Not only the figures have been interpreted as per the mathematical rules, but they have also been analyzed according to the prevalent conditions in the cement industry during the period of analysis. Therefore, it is necessary to give the industry scenario before going further with the results and discussion.
CEMENT INDUSTRY DURING 2001 TO 2005
Cement industry has shown a mind puzzling performance during 2001 to 2005, if gazed by the eye of finance. However, an analyst must keep the market and economy in mind before making a final opinion about a sector. As far as financing the assets is concerned, cement firms have resorted to use equity financing for the most part. In only one instance of the sample data, debt has increased past the total assets also. One reason for this equity financing is the reluctance of lenders to give debt to these firms.
We also have to consider the Afghanistan's high demand of cement, which boosted the sales of the cement sector in Pakistan, tremendously. Around 50% of the firms have been able to come up with normal non-negative returns. Other times, firms have also sustained heavy losses. The increase in revenue may be supported as even when the equity has been increasing over the five years, the Return on Equity shows a progressive trend. Given the increase in denominator the firms have surely made huge revenues. Not only had the sales prices increased as per the Law of Demand, but also unit if Sales had increased. Hence, revenues showed a two fold increase.
VARIABLE WISE DISCUSSION OF RESULTS
Capital structure
Capital structure which is my independent variable, only 25% of the sample firms used more equity than debt as funding source. Another 25% used excessively high amounts