This objective of this study is to investigate the impact of firm size, asset tangibility and retained earnings on the financial leverage. In this regard, auto sector was taken as case consisting of sub-sectors namely motor vehicles, trailers and auto parts. Data pertaining to 22 firms was collected from the financial statement analysis document issued by the State Bank of Pakistan (SBP). The multiple regression model was used to determine the relationship between the underlying variables. The results indicated that firm size and asset tangibility significantly affect the financial leverage. Moreover, negative relationship was noted between the respective variables. It was found that retained earnings have no significant impact on financial leverage.
Keywords: firm size, asset tangibility, retained earnings, financial leverage.