Impact of capital structure and firm’s performance on market competitiveness: Evidence from Pakistan textile sector

Capital structure is the mixture of debt and equity financing that a company uses to funds its operational activities and investment activities. This financing influences a firm’s risk profile and capacity to respond to the market competition and market pressures, directly affecting its financial health and competitive standing. In this paper, we examine the impact of capital structure on firm performance and market competitiveness, specifically within Pakistan textile sector. The research explains how different financial metrics influence market concentration, measured by the Herfindahl-hirechman index (HHI). Empirical results reveal that DAR and ROA have a positive impact, statistically significant effect on market competitiveness, that demonstrating the increased leverage and asset efficiency can enhance a firm’s competitiveness. Generalization of the results may be limited which mean that the future research is required to study the phenomenon in multiple industries and regions, other than the core main variables, the use of other variables could enhance a better insight about the market competitiveness.