The Lahore Journal
of Business

The Lahore Journal
of Business

Lahore Journal of Business

(HEC recognized journal in “Y” category)

The Lahore Journal of Business is aimed at providing a specialized forum for dissemination of qualitative and quantitative research in various areas of business administration. The LJB invites researchers, policy makers and analysts to submit original theoretical and empirical papers that explore and contribute to the understanding of various areas in the business domain. The Journal aims at bringing together state-of-art research findings, particularly from emerging markets, in various business disciplines including (but not limited to) accounting, banking, management, marketing, finance, investments, human resource management and organizational behavior.

How Do Firms Achieve Their Capital Structure? A Configurational Analysis Using fsQCA

https://doi.org/10.35536/ljb.2026.v13.i2.a4

  • Veera Salman
  • veerasalman242@gmail.com
  • Researcher Department of Accounting & Finance, Kinnaird College for Women, Lahore, Pakistan
  • Farah Naz
  • farah.naz@kinnaird.edu.pk
  • Assistant Professor Department of Accounting & Finance, Kinnaird College for Women, Lahore, Pakistan.

Submitted

November 22, 2023

Accepted

November 22, 2023

Accepted

November 22, 2023

  • Received
  • 19th December 2025
  • Revised
  • 27th April 2026
  • Accepted
  • 26th June 2026
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Abstract


This research explains the contemporaneous role of credit ratings and financial characteristics for capital structure decisions. It offers a comparative analysis of financial and nonfinancial firms for 2019–2023. Fuzzy-set qualitative comparative analysis (fsQCA) was employed. Size, age, leverage, total debt, total equity, and their respective changes were found to be necessary for capital structure adjustments for financial firms. In contrast, only total debt was found to be necessary in non-financial firms. Contrary to credit rating-capital structure theory, the results shift the perspective. Ratings were neither necessary nor sufficient for either sector’s capital structure decisions, indicating they are not central but contextual factors with limited explanatory power. The configurational analysis showed that the core and the peripheral also vary across the firms. It can be implied that firms’ internal characteristics matter more than external credit ratings for changes in capital structure decisions. Regulators should focus on multi-dimensional supervision in the financial sector, while managers would benefit from optimal leverage, efficient debt servicing, and liquidity management in the non-financial sector. Researchers and practitioners are recommended to employ fsQCA as an auxiliary diagnostic method to identify additional causal factors. The study contributes by comparing Pakistan’s financial and non-financial firms through a configurational lens.

Keywords

Credit rating

capital structure

financial characteristics

Pakistan

non-financial firms

financial firms

This work is licensed under LJB.

  • Citation

Salman, V., & Naz, F. (2026). How Do Firms Achieve Their Capital Structure? A Configurational Analysis Using fsQCA. The Lahore Journal of Business, 13(2), 89-124.

https://doi.org/10.35536/ljb.2026.v13.i2.a4

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