Debt Structure and Future Financing and Investment. Evidence from Oil and Gas Sector of Pakistan

Purpose: This study aims to investigate the link between debt structure and future external financing and investment, existing empirical literature suggest various features of debt structure such as maturity structure, seniority and security profile might affect firms’ future financing and investment opportunities. However, literature is vague as to which way these characteristics of debt are actually related to observed financing and investment; this is partly due to the fact that the assumptions in theoretical predictions lack in terms of channels they consider relating to debt structure and future external financing and investment. This study investigates how debt structure is associated to financing and future growth opportunities in terms of fund raising, whether debt structure of oil and gas sector of Pakistan. Design/Methodology/Approach: Dynamic analysis were used to analyze the data Findings: The results provide interesting insights, as traditional positive relationship in between short-maturity of debt external financing has revealed negative relation, which is in conflict with existing literature from agency cost but supports the rollover risk. The sector might be better off if it opts out to equity financing, which will open up new investment avenues for future financing and investment. Interestingly secured-debt does not appear to be beneficial owing to differing leveraging patterns within the sector. Implications/Originality/Value: The paper provides new insights in terms of investment and financing patterns particularly in context of maturity structure of debt.