THE IMPACT OF R&D AND TECHNOLOGY ON FINANCIAL LEVERAGE: EVIDENCE FROM PAKISTAN’S PHARMA INDUSTRY

Abstract

This study examines the interplay among investment strategies, technological innovation, and financial leverage in Pakistan’s chemical and pharmaceutical sector. The primary objective is to investigate how research and development (R&D) investment and technological advancement influence firms’ financial leverage decisions in this industry. The research adopts a quantitative approach, using secondary data from annual reports of listed chemical and pharmaceutical companies for the period 2016–2023. A fixed-effects regression model is employed to analyze relationships among key variables, including investment, financial leverage, technological innovation, and firm size. The empirical findings reveal dynamic interactions between financial and technological factors within the sector. Results indicate that investment is significantly related to financial leverage. However, financial leverage is negatively and statistically significantly associated with firm performance indicators. In contrast, the relationship between financial leverage and technological innovation is statistically insignificant. These findings suggest that while firms actively invest, greater reliance on debt financing may not necessarily support technological innovation within the sector. The results highlight the complex financial-technological nexus that shapes strategic decision-making in Pakistan’s chemical and pharmaceutical industry. The study provides important insights for corporate managers, financial analysts, and policymakers by emphasizing the need to align financial structures with innovation-driven growth strategies. Overall, this research contributes to the existing body of knowledge by providing industry-specific evidence from a developing-economy context. It underscores the importance of carefully structured financial policies to enhance sustainable growth and technological competitiveness in Pakistan’s chemical and pharmaceutical sector.