Determinants of Textile Firms’ Profitability in Pakistan

Abstract

Textile sector is the most important sector in the economy of Pakistan especially in terms of employment generation and exports. Any improvement in the growth and profitability of textile sector is likely to have significant impact on income generation, foreign exchange earnings, reducing poverty and improving the standard of living of people. The objective of the present study is to examine the profitability of the textile sector in Pakistan, concentrating mainly on the microeconomic factors. Several studies have undertaken the task of studying the relationship between firm’s profitability and its determinants i.e. size, growth,
liquidity, leverage etc. The analysis of present study is based on unbalanced panel data of 111 textile firm for the period of 2006 to 2011. The data pertain to short term, long term debts, total sales, earnings before interest and taxes, current assets, total assets, current liabilities, non-current liabilities etc. The present study shows that sales of the firm has positive and leverage has negative impact on the profitability of the firm. The private sector can engage itself on the basis of this study by concentrating on factors which have significant positive impact on
its profitability. Any improvement in the growth of firms is likely to benefit many segments of society like traders and workers through more employment and income.