Impact of Capital Structure on Firm Performance in Cement Sector

Abstract

This study looks at how capital structure affects the financial performance of cement companies that are listed on the Pakistan Stock Exchange (PSX). The primary goal is to observe whether the profitability and leverage really have any substantial impact on shareholders' earnings. Net Profit Margin (NPM), Gross Profit Margin (GPM), and Debt-to-Equity Ratio (DER) are the independent variables while Earning per Share (EPS) is dependent variable. The data presented here are panel data of ten cement companies listed with a period of 2016-2025. Secondary data were extracted from the annual reports, describing them by descriptive statistics, performing a correlation analysis and finally running pooled Ordinary Least Squares (OLS) regression in EViews. Based on the results, it revealed that Net Profit Margin and Gross Profit Margin have a positive influence and are statistically strong with the Earnings per Share. However, Debt-to-Equity Ratio is obtained with a negative correlation with EPS. The regression equation has a relatively high explanatory power with an explanatory rate of approximately 71% of the changes in EPS. Overall, the study concludes that profitability appears to be more important than financial leverage in the cement industry of Pakistan. The overall results should be relevant to corporate leadership, investors and decision makers in their corporate financing considerations, and when they are looking to maximize shareholder value.