Firms’ Leverage: Pre and Post CPEC Announcement Comparison

Abstract

In the last few years, Economic corridors have been the primary concern of the Chinese government, whereby the government of China decided to commence a mega project by the name of One Belt One Road (OBOR) in the year 2013. This grand scheme consisted of several projects, including a project named China Pakistan economic corridor (CPEC), which was viewed as a turning point not only for the economy of Pakistan but for the regions nearby. This research study primarily focuses on the CPEC instead of the whole OBOR project, where the study aims to compare the firms’ leverage before CPEC announcement and after CPEC announcement and, more particularly, to see whether CPEC has any impact on firm’s leverage or not, ratios of leverage for firms are the same? Or has been increased to avail benefits from CPEC. Sectors chosen for the study are Automobile, Cement and Steel. The study used secondary data of eight years, where four years were taken before the CPEC announcement and four years were taken after the CPEC announcement of fifteen listed companies; the criteria for choosing the top five companies from these three sectors for analysis was based on market capitalisation. Furthermore, data were collected from the annual statements of these companies. The study used SPSS 23 for the analysis and the results of the study state that CPEC impacts firms’ leverage for the Cement and Automobile sector. In contrast, the results for the Steel sector are non-significant means the leverage size of the steel sector is the same before the CPEC announcement and after the CPEC announcement.