The Influence of Leverage on Firm Performance: A Comparative Study of Family and Non-Family Firms in Pakistan

Abstract

This study examines the influence of leverage on firm performance of non-financial sector in Pakistan while emphasizing the ownership pattern of the firms. Analysis of a sample of 400 non-financial enterprises listed on the Pakistan Stock Exchange from 2013 to 2024 utilizing panel data regression reveals a predominantly negative relation between leverage and performance. The performance is measured through Return on Assets (RoA), Return on Equity (RoE) and Tobin’s Q. Conversely, non-family-owned enterprises leverage advantages, demonstrating favorable performance, whilst family-owned firms display weaker or negative relations. These findings underscore the agency problems in family-controlled enterprises, where debt may be perceived negatively. The research indicates that financial decision-making in Pakistan must take ownership arrangements into account, and subsequent studies might investigate the impact of board dynamics and succession planning in family enterprises.