Effect of Financial Leverage on Corporate Profitability: The Role of Firm Size and Asset Growth

Abstract

This paper examines the connection among economic leverage and company profitability, in which the scale of the company and growth of belongings are moderating and manage variables respectively, in a panel version. The trouble of debt and lucrativness has been at the centre of the company finance idea and empirical proof approximately the difficulty has been inconclusive in numerous monetary settings and company attributes. This observe makes use of panel regression evaluation the usage of fixed-results and random-results fashions using secondary information acquired with the aid of using the 2015-2024 annual monetary document of forty non-monetary corporations indexed withinside the Pakistan Stock Exchange to decide the effect of debt financing at the go back on property and the way the connection is moderated with the aid of using organization length and asset boom dynamics. Results suggest that monetary leverage has a sturdy bad effect on company profitability, company length indicates a moderating high quality effect and asset increase indicates a robust wonderful effect. The Hausman check proved the higher version withinside the fixed-outcomes version as compared to the random-outcomes one. The studies suits the modern-day frame of literature at the capital shape and organization overall performance withinside the context of growing economies and presents beneficial recommendation to company monetary managers and policymakers.