Does Zero-Leverage Phenomenon improve Sustainable Environmental Manufacturing Sector: Evidence from Pakistani Manufacture Industry?

Abstract

The purpose of this study is to examine the key determinants of the policy of zero-leverage firms and why these firms are a financial constraint. The concept of capital structure has now adopted a new term which is known as zero-leverage (ZL) policy. Despite of endless benefits of leverage zero-leverage phenomenon is yet emerging not only just in developed countries but also in developing countries. This study has taken the sample of listed non-financial firms of Pakistan for 2006–2020. The Logit regression model is used to investigate the determinants of the zero-leverage phenomenon. Moreover, the proxy of constraint and unconstraint firms are dividend-paying and non-dividend-paying zero-leverage firms as well as SA-index respectively. The results show that the key determinants of ZL policy are profitability, growth rate, tax and dividend. Further, findings show that most of the ZL firms are a financial constraint. However, the sub-section of ZL firms is also found financially unconstraint with high profitability.