Core Predictors of Debt Specialization: A New Insight to Optimal Capital Structure

Debt structure composition is an essential topic of discussion for the management capital decisions. Researchers made extensive efforts to understand criteria selecting debts, specifically, know about reasons debt specialization, concealed in identifying its predictors. This question not only establishing field but also financial managers design corporate strategy a way that leads attaining optimal structure. Sophisticated modeling applied identify core predictors influencing strategic choices address this issue. Data were collected from 419 non-financial companies listed at Karachi Stock Exchange 2009 2015. study has validated specialization by showing short-term debts maintain their position over years and remain most popular type loan among Pakistani firms. Further, it provides comprehensive view cross-sectional differences firms involved applying holistic approach. Results show small, growing, dividend-paying companies, having high expense risk ratios, followed strategy. enables reduce agency conflicts, transaction costs, information asymmetry, building up good market reputation. Conclusively, we have identified gross profit margin, long-term asset ratio, firm size, age, tangibility, industry ratio as reliable sustainable business growth.