Impact of Capital Structure, Dividend Policy and Working Capital Management on Firm Performance: Evidence from Fertilizer Sector in Pakistan

This study explores the impact of financial structure and operational efficiency on company performance in the fertilizer industry, with a focus on three major independent variables: Debt to Equity Ratio (DER), Dividend Payout Ratio (DPR), and Cash Conversion Cycle (CCC) and performance is measured by means of Return on Equity (ROE). The study utilizes secondary dataset acquired through selected fertilizer firms listed in the Pakistan Stock Exchange (PSX) throughout the period 2019–2023. Applying the least squares method to panel data regression. The data demonstrate that DER has a statistically significant negative influence on ROE, demonstrating that excessive leverage affects profitability owing to higher financial risk. Conversely, DPR and CCC do not exhibit any meaningful link with ROE, showing that dividend policy and working capital management efficiency may not directly impact performance in the fertilizer business. These results are compatible with the famous trade off theory of capital structure and the dividend irrelevance hypothesis. The study suggests that capital structure decisions, notably controlling leverage, are crucial for increasing company performance in capital-intensive sectors. Although different companies have different dividend and cash management policies, they seem unlikely to be major ROE factors in this setting. The research has practical implications for financial managers, investors, and regulators in enhancing financial performance through smart debt management and operational measures.