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We form our variables using data derived from the financial statements contained in the Stock Exchange and company’s websites. Our sample consists of all Oil and Gas Marketing companies listed with Stock Exchange.

Following Table will make you understand about the Variables, Determinants, Measures and their references using the same measure.

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Measures used

Some refrence using the same measures


Total Liability – Equity ÷ Total Assets

Waliullah&Muhammad Nishat (2008), NikolaosEriotisDimitriosVasiliou and Zoe Ventoura-Neokosmidi(2007,Rajan and Zingales(1995), Shah and Hijaz(2004),


Log of sale

Titman and Wassels(1988), DebabrataDatta and BabitaAgarwal (2007),

Raul Seppa(2008)


EBT ÷ Total Assets

DebabrataDatta and BabitaAgarwal(2007), Rajan and Zingales(1995)

DBT_EQT(Debt to Equity Ratio)

Total Liability ÷ Common Equity

Ali Basharat (Lecturer) Air University Islamabad.

CR(Current Ratio)

Current Assets ÷ Current Liability

Ali Basharat (Lecturer) Air University Islamabad.


Fixed Assets ÷ Total Assets

Attaullah Shah and Safiullah Khan(

2007),Titman and Wessels (1988),Rajan and Zingales(1995),Fama and French (2000)

In order to comment on the capital structure of Oil and Gas firms in the perspective of the Pakistan economy, it is desirable to take into consideration all the sectors of the economy. Few of them are directly and indirectly keeping in mind this requirement we select five companies, as under this index all the major companies of important segments of the economy are listed. The source of our data is SEC Prowess data base.


We have taken six variables out of which leverage is taken as a dependent variable. We take the total Debt (Total Liability) to total asset ratio as proxy for Leverage (dependent variable). For potential determinants of leverage, we study five independent variables namely Tangibility, Size, Profitability, Debt to Equity ratio and Current ratio.

Explanation of Variables:

In their cross-sectional study of the determinants of capital structure, Rajan and Zingales(1995)examine the extent to which, ath the level of the individual firm, leverage may be explained by for key factors, namely, market-to-book ratio i.e. growth, size, profitability, and tangibility. Their regression analysis differ slightly across countries, they appear to uncover some fairly strong conclusion.

But our study of capital structure follows the framework of Rajan&Zingles(1995) Shah &Hijazi(2005), NikolaosEriotis& Zoe Ventoura(2007) and Jeam-Laurent Viviani(2008)that use tangibility of assets, Firm size, Profitabllity. But in our study we have also used two more variable that measure more reasonably leverage of firm i.e Debt to Equity ratio and Current Ratio.


Measure of Leverage (LG)

In the literature the term "Leverage"

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