The Impact of Free Cash Flow on Capital Expenditure in Pakistan's Manufacturing Sector: An Empirical Analysis
DOI:
https://doi.org/10.58932/MULE0031Keywords:
Free Cash Flow, Capital Expenditure, Pakistan, Manufacturing SectorAbstract
This study aims to elucidate the connection between capital expenditure (CapEx) and free cash flow (FCF) among manufacturing firms listed on the Pakistan Stock Exchange and to examine FCF's influence on CapEx. The study focuses on manufacturing firms in Pakistan listed with the SECP as representative businesses. Descriptive statistics were used to analyze the data collected throughout the research period. The outcomes demonstrate that FCFs have a statistically significant relationship with the capital expenditure of manufacturing firms. Free Cash Flow (FCF): p-value (0.02 < 0.05). The relationship between FCF and CapEx is statistically significant. Additionally, the analysis revealed that leverage has a notable influence on the capital spending of manufacturing businesses, showing that leverage affects capital expenditure. The research also found that the dividend distribution ratio does not affect the Capital Spending of Manufacturing Firms. For long-term stability in the manufacturing sector, authorities may use these results to inform rules that support sustainable borrowing, encourage sound financial practices, and create balanced dividend and investment plans. It could be advantageous for the upcoming researchers to carry out longitudinal studies to monitor the effects of variations in free cash flows, financial leverage, company size, and liquidity on capital expenditure decisions.
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