<abstract xmlns="http://www.w3.org/1999/xhtml"><p>We examine the relationship between growth opportunities and insolvency risk in a mediating framework through financing decisions for 330 listed firms on the Pakistan Stock Exchange (PSX) This study covers a data period of five years ranging from 2013 to 2017. Financing decisions used in this study involve capital structure decision and debt maturity decision. We applied robust clustered panel OLS regression to the data and found a negative relationship between growth opportunities and insolvency risk in all samples consisting of overall, large and small firms. Growth opportunities have a negative impact on the capital structure, but debt maturity was influenced positively. Financing decisions influenced the insolvency risk positively. We used Baron and Kenny’s (1986) approach to detect the intervening effects of financing decisions. Further, Sobel’s test used to check the significance of mediation. Partial mediation was found for the debt maturity ratio in the large and overall sample of firms. However, the capital structure did not mediate the relationship between growth opportunities and insolvency risk in this study.</p></abstract>

We examine the relationship between growth opportunities and insolvency risk in a mediating framework through financing decisions for 330 listed firms on the Pakistan Stock Exchange (PSX) This study covers a data period of five years ranging from 2013 to 2017. Financing decisions used in this study involve capital structure decision and debt maturity decision. We applied robust clustered panel OLS regression to the data and found a negative relationship between growth opportunities and insolvency risk in all samples consisting of overall, large and small firms. Growth opportunities have a negative impact on the capital structure, but debt maturity was influenced positively. Financing decisions influenced the insolvency risk positively. We used Baron and Kenny’s (1986) approach to detect the intervening effects of financing decisions. Further, Sobel’s test used to check the significance of mediation. Partial mediation was found for the debt maturity ratio in the large and overall sample of firms. However, the capital structure did not mediate the relationship between growth opportunities and insolvency risk in this study.

Are Growth Led Financing Decisions Causing Insolvency in Listed Firms of Pakistan?

School of Management, Jiangsu University / School of Business, Jiangnan University

Key Laboratory of Modern Agriculture Equipment & Technology, Ministry of Education

Zagreb International Review of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

We examine the relationship between growth opportunities and insolvency risk in a mediating framework through financing decisions for 330 listed firms on the...

Are Growth Led Financing Decisions Causing Insolvency in Listed Firms of Pakistan?

Published Online: Dec 12, 2020

Page range: 89 - 115

DOI: https://doi.org/10.2478/zireb-2020-0015

Keywords
Growth Opportunities, Financing Decisions, Insolvency Risk

© 2020 Rana Yassir Hussain et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Are Growth Led Financing Decisions Causing Insolvency in Listed Firms of Pakistan?

Published Online: Dec 12, 2020

Page range: 89 - 115

DOI: https://doi.org/10.2478/zireb-2020-0015

KeywordsGrowth Opportunities, Financing Decisions, Insolvency Risk

© 2020 Rana Yassir Hussain et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Growth Opportunities, Financing Decisions, Insolvency Risk