Sector-wise analysis for capital structures and managerial behavior in Shariah-compliant and conventional firms of Pakistan

Authors

  • Naveeda K. Katper Department of Syriah and Management, Academy of Islamic Studies, University of Malaya, Jalan Universiti, 50603 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia Institute of Business Administration, Faculty of Commerce and Business Administration, University of Sindh, Allama I.I. Qazi Campus, 76080, Jamshoro, Pakistan. Author
  • Azian Madun Department of Syriah and Management, Academy of Islamic Studies, University of Malaya, Jalan Universiti, 50603 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia Author
  • Sheeraz Akhtar Katper University of Sindh, Allama I.I. Qazi Campus, 76080, Jamshoro, Pakistan. Author

Keywords:

Sectors, Shariah-compliant firms, conventional firms, Capital structure, managerial behaviour, trustworthiness

Abstract

The study provides the empirical analysis about the various business sectors in Pakistan based on conventional and Shariah-compliant approach. The objective of the study is to discover differences and similarities for the determinants of the capital structure and managerial behaviour of the two samples. This research is based on background theories of capital structure i.e. pecking order theory and trade-off theory as well as agency theory to explore the managerial behaviour among sectors. We applied regression analysis OLS, fixed and random effect techniques by using two models. In the first objective, model one represents the leverage model to check the variables/ determinants of capital structure. In the second objective, model two explores the managerial behaviour/ trustworthiness for the decisions about the capital structure of various sectors. The results show that there are some differences as well as similarities in different variables between the funding approach in the capital structure Shariah-compliant and conventional sectors. We observed the different behaviour in the managerial decisions for Shariah-compliant and conventional firms. Majority of Shariah-compliant sectors’ managers seem trustworthy and the conventional sectors’ mangers may tend to self-interest thus, proving our hypothesis. This study may guide different stakeholders as the investors, businesses and policymakers while deciding fund management. The stakeholders can judge the managerial behaviour in different sectors regarding financing according to their preference and level of debt and equity mix to decide accordingly.

https://doi.org/10.5281/zenodo.10347509Shariah-compliant firms

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Published

2021-09-30

How to Cite

Sector-wise analysis for capital structures and managerial behavior in Shariah-compliant and conventional firms of Pakistan. (2021). International Research Journal of Management and Social Sciences, 2(2), 192-206. https://irjmss.com/index.php/irjmss/article/view/141

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