DefinePK

Abstract

Present study investigates the existence of macroeconomic variables effect on capital structure and to   evaluate the behavioral aspects of financial signaling and asymmetry of information on the non-financial sector of Pakistan. Extreme bounds analysis an econometric technique is used to analyze the robustness of financial signaling and information asymmetry covariates of macroeconomic factors on capital structure policies and to compute the empirical findings. The results conclude that interest rate is significantly influencing the decisions of the managers regarding to the composition of long run financing decisions. Hence it is identified that corporate non-financial sector has lesser signaling effect generated by the macroeconomic forces in financial decisions. However the null hypnosis cannot be rejected as this study identified. This study is meaning full and leads toward the practical version of financing decisions by the corporate sectors with the changing policies of the macroeconomic forces in Pakistan. There must be coherence between the macroeconomic policies and corporate sector policies, therefore information asymmetries may overcome.