Journal of Digital Health Records, Medical AI and Informatics Systems
The Effect of Financial Leverage, Supply Chain Finance and Liquidity on Firm Performance in Pakistan: A Comparative Analysis of Cement, Textile, Pharmaceutical and Sugar Sectors
Abstract
Bushra Fatima Khan and Dr. Danish Ahmed Siddiqui
Financial leverage, supply chain finance, and liquidity are three substantial features of overall firm performance. This study examines how financial leverage, supply chain finance, and liquidity affect a firm’s performance in Pakistan's cement, textile, sugar, and pharmaceutical sectors. The financial reports for all 50 companies in four industries, which were available on their official websites, were used to compile data for the past 10 years.
The data was collected from 2011 to 2020. Another source used to collect data is the World Bank. Analyzing data was done using the generalized method of moment (GMM) the data, and the results show that financial leverage has a negative impact on company performance in the cement industry, but a positive impact in the textile, sugar, and pharmaceutical industries. In the cement industry, supply chain finance (SCF) has a detrimental effect on firm performance whereas supply chain financing has a positive impact on the textile, sugar, and pharmaceutical sector. Liquidity (LIQ) has a favorable impact on firm performance in the cement, textile, sugar, and pharmaceutical sectors.
The results also reveal the critical role supply chain finance plays in boosting firm performance. This study's innovative conclusion is that increased debt levels and their inefficient use have a detrimental effect on firm performance. The findings indicate that financial leverage improves a company's performance as long as debt levels do not exceed equity. Due to the many market and industry conditions and scenarios that businesses in a given industry must deal with, several factors have varying effects on how well a firm performs. This research could help upper management at cement, textile, pharmaceutical, and sugar companies make better decisions by clearly defining how to perform effectively to boost company performance, which can entice investors to make investments in businesses with strong market positions. and also use that knowledge to enhance future performance