Abnormal Returns, Corporate Financial Policies and the Dynamics of Leverage: Empirical Evidence from Non-Financial Sector of Pakistan


  • Kashif Hamid Faculty Member, IBMS,University of Agriculture Faisalabad, Pakistan
  • Zahid Hussain Faculty Member, FMS, National Textile University, Faisalabad, Pakistan
  • Muhammad Mudasar Ghafoor Assistant Professor, University of the Punjab, Jhelum Campus, Jhelum. Pakistan




Financial Leverage, Total Leverage WACC, Fixed Effect, Random Effect, Robust


The aim of this study is to evaluate impact of corporate financial policies and the dynamics of leverage on financial performance of non-financial sector in Pakistan. In this study we used the data from Fertilizer, Chemical and Cement sector for the period 2008-2017. Abnormal return has been taken as dependent variable and Change in cash to lagged market values, Change in EBIT to lagged market values, Change in dividend to lagged market value, Net Financing to lagged market value, Lagged cash values to lagged market values, Lagged cash values to lagged market values crossed by change in cash to lagged market value, Change in total assets net of cash to lagged market values, Change in interest to lagged market values, Operating leverage, Financial leverage, Total leverage, Leverage ratio, Leverage ratio to change in cash crossed by lagged market values  and  WACC are taken as explanatory variables. OLS, Fixed effect and Random effect models has been used to express the impact of these variables on return. Hence it is concluded that leverage dynamics are significant contributors in designing the corporate financial policies. Corporate financial policies have significant impact on the financial performance of the non-financial sector of Pakistan.


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How to Cite

Hamid, K., Hussain, Z. ., & Ghafoor, M. M. . (2020). Abnormal Returns, Corporate Financial Policies and the Dynamics of Leverage: Empirical Evidence from Non-Financial Sector of Pakistan. Review of Economics and Development Studies, 6(1), 153-166. https://doi.org/10.47067/reads.v6i1.193