European Journal of Business and Manageme ISSN 2222-1905 (Paper) ISSN 2222-2839 (O Vol 4, No.12, 2012 How Firm Characte and Insura Faculty of Administrative Tel: +92 MS Scholar A Tel: +92- PhD Scholar Tel: +92-3 PhD scholar G Tel: +92-333 Abstract The paper provides further evidence the determinants of capital structure financial pattern of firms in the two Pecking order theory and Trade-off sectors, whereas there was little evi and 24 insurance companies listed conducted using secondary data sou variable debt ratio (leverage) was t liquidity, profitability, non-debt tax to determine the affect of firm level were found to have negative impac tangibility has direct positive correla Keywords: capital structure, firm theory. 1. Introduction What are the determinants that aff researchers have devoted extensive important research question. After th question acquired special significan researchers. However, still there is n which leaves the topic of capital s company's leverage and equity th corporations finance their assets s governance is of high standards. It i carefully otherwise they can face the is necessary that for minimizing cos value firms must make a strategy to which will result in maximization structure, because their exist differen science to determine the exact opti after studying different determinants capital structure when they try to m capital structure over time or acros Boot et al. (2001) include Pakistan studies done so for on capital structu UK, and there is not enough researc ent Online) 6 eristics Affect Capital Structure ance Sectors (The Case of Pakist Sajid Gul (Corresponding Author) e Sciences Air University Islamabad ,Mardan 23200 K 2-332-8102955 *E-mail: sajidali10@hotmail.com Muhammad Bilal Khan Air University Islamabad,Bannu 28100 KPK Pakistan -334-8819057 E-mail: mbilalkhan88@yahoo.com Nasir Razzaq SZABIST Islamabad,Rawalakot 12350 AJK Pakistan 336-5505398 E-mail: master_nasir18@yahoo.com Naveed Saif Gomal University D.I Khan,Bannu 28100 KPK Pakista 3-9300811 Email: Naveedsaif_naveedsaif@yahoo.com e of the capital structure theories pertaining to a devel e for the firms in the banking and insurance sectors o o sectors follow which capital structure theory. We ha f theory are pertinent theories to the companies’ capi idence to support the Agency cost theory. The sampl d in the, "Karachi Stock Exchange", during 2002-20 urced from the company’s annual reports and Karach the dependent variable. While the explanatory variab shield and tangibility of assets. We have used panal l characteristics on capital structure. The variables pr ct on debt ratio, while size and growth were positivel ation with leverage in insurance sector but negative in characteristics, KSE, pecking order theory, agency fect the firm’s capital structure choice? In the field e time both theoretically and empirically to discov he publication of seminal papers by Modigliani and M nce. The determinants of capital structure have been no unifying theory of capital structure even after decad structure open for further research. Capital structure hat a firm uses to finance its assets. It is the me sets up their ownership structure and influence w is necessary for every firm that the capital structure de e problem of bankruptcy and financial distress. So for st an efficient mixture of capital must be allocated. In o lower WACC, due to which the company’s net inc of value of the firm. Every firm needs to find ou nt firm specific factors that affect their capital structur imal capital structure; therefore companies obtain a s of capital structure which they consider as optimal. E maximize the overall value. Therefore to explain the ss regions research has been done on different theori in his work on capital structure on 10 developing cou ure determinants, have taken data from developed cou ch work in the field of capital structure in developing www.iiste.org e in Banking tan) KPK Pakistan n n an m loping country and tests of Pakistan, to find that ave found that both the ital structure in the two le consists of 22 banks 009. The research was hi Stock Exchange. The bles were size, growth, least square regression ofitability and liquidity ly correlated. Whereas, banking sector. y cost theory, trade-off d of corporate finance, ver the answer to this Miller (1958, 1963) this investigated by several des of serious research, e is basically a mix of ethod by which public whether their corporate ecision must be handled a high leverage firm, it n order to increase their come will be increased ut their optimal capital re choice. But it is not a target capital structure Every firm has different e variation in the firm's ies of capital structure. untries. Majority of the untries mostly USA and countries. In this paper