A A reflection of firm value, capital structure and liquidity

A case of cement sector in Pakistan

Abstract

This effort aims at exploring the firm value (FV), liquidity, and leverage (LEV) while FV is considered the most significant variable for the long run sustainability of the firm. The 28 companies listed at Pakistan stock exchange (PSX) of the cement sector has chosen as sample of the study for a sample significant period of 10 years (2009-2018). After analyzing the data of the given variables through descriptive statistics, panel data regression, and correlation, it is concluded that there is positive significant relationship exists between ROA (Return on Assets) and LEV whereas contrary relationship is found between Liquidity Ratio and ROA. It is also observed that Liquidity Ratio has insignificant impact on ROA which means that timely satisfying the claims of the creditors has a minor impact on the firm value while leverage shows positive impact on Firm value as compare to the impact of liquidity on the FV. The study suggested that the cement firms should take long term soft debts in order to coup up their mega orders due to mass level construction in Pakistan as well as in Afghanistan, which will increase their firm value.