Impact of Corporate Governance and Firm Specific Characteristics on Cost of Equity in the Pakistani Textile Sector: An Empirical Analysis

Abstract

This research delves into the determinants of the Cost of Equity (CAPM) within the Pakistani textile sector from 2011 to 2020. Given the economic significance of the textile industry in Pakistan, understanding the factors influencing its financial dynamics is crucial. Through OLS regression analyses, we explore the impact of various variables, including firm age, market beta, board characteristics, financial performance, governance metrics, ownership structures, market indices, financial composition, and debt-related ratios on the cost of equity. The results provide nuanced insights, highlighting the influence of firm age, market beta, board characteristics, and several other factors on the cost of equity in the textile sector. These findings offer valuable insights for industry practitioners, policymakers, and researchers interested in comprehending the intricate financial dynamics of the Pakistani textile industry. The economic relevance of Pakistan's textile sector (2011-2020) supports this study's examination of Cost of Equity (CAPM) factors. Regression analysis investigates business age, market beta, governance, and financial performance, yielding critical insights for industry and policy. Fresh data, a larger sample size, and a thorough examination of corporate governance variables improve the study's relevance and add to the current research, with practical implications for controlling the financial dynamics of Pakistan's textile industry.