Determinants of Firm’s Financial Performance: An Empirical Study on Textile Sector of Pakistan – Significance of the Study

Textile sector is the largest industry in Pakistan. It consist of 164 firms which includes 145 firms related to spinning, weaving and finishing while 6 firms consist of made up textiles articles and the remaining 13 firms are related to other textiles items. From the last many years, Pakistani textile industry is facing a large number of crises due to continuous load-shedding from the last many years. A large number of firms in this sector have closed their operations because without electricity it is not possible to produce any product in textile sector. The remaining firms are forced to take loan for their survival in order to use generator or private electricity resources which are much costly. It has increased debt financing trend in this sector and the firm’s performance is affected largely by this trend. APTMA has requested to Government of Pakistan to take some serious steps in order to rescue the textile industry for possible survival by controlling the problem of electricity and restructuring the outstanding loans. In this way PICIC commercial bank was previously establish to provide loan both short term and long term according to this sector need and recently NIB bank has been established for this purpose.
The Textile Sector covers 40% of non-financial industry in Pakistan. It can influence the performance of other sectors by its financial decision making and actions thereof. The researcher aims to explore the factors that determine firm’s performance in textile sector of Pakistan so that the financial performance can be groomed in overall non-financial sector of Pakistan. The researcher’s objective is to find out the different factors which are significantly affecting firm’s performance in textile sector of Pakistan for the period 2005-2010.
The researcher wants to explore the current study with reference to the following research questions:
What factors are significantly impacting the firm’s performance in textile industry of Pakistan? Do the observed factors also consistent with the previous researcher’s findings.