Three Corporate Finance Practices in Pakistan: A Review of Previous Studies and Way Forward

This study reviews the previous empirical studies about the Pakistani capital market and specifies the pattern of three corporate finance practices. Various activities performed at the firm level such as capital budgeting, capital structure, and dividend payout policy are analyzed in the field of corporate finance. The capital budgeting technique consists of six methods, that is, net present value, discounted cash flow, payback period, and internal rate of return. However, Pakistani firms are often interested in the net present value and the internal rate of return for capital investment evaluation. Similarly, the capital structure decision carries the debate regarding two options of financing, that is, debt financing and equity financing, although the literature shows that the Pakistani firms generally follow the pecking order theory and prefer debt financing. Similarly, as for concern dividend payout policy, the extant literature discusses different theories and determinants although it is still not possible to generalize the dividend payout trend on its basis, specifically in the Pakistani context. Corporate managers and policymakers can use the conclusion of this study for strategic purposes

Impact of Firm Reputation on Firm Financing Decision: Evidence from Non-Financial Sector of Pakistan

Research aims: Literature vows that firm reputation plays dynamic contribution in corporate financing decision. In line with findings of previous studies, this research explores the participation of firm reputation in firm financing specifically in Pakistani non-financial sector data set. Design/Methodology/Approach: Fixed effect model (FEM) applied to check the regression among the variables. Research findings: Findings signify the impact of firm reputation on firm financing decision. The price-earnings (P/E) ratio affiliates positively and significantly with firm financial leverage because an increment in price-earnings (P/E) ratio increases stability of firms. There exists negatively and significantly association between firm age and firm financial leverage due to decreases in usage of financial leverage with the passage of time. The firm age links negatively and significantly with trade-credit because older firms do not desire to use trade-credit. Moreover, assets tangibility has positive and significant impact on trade-credit because tangible assets work as loan collateral to get trade-credit. Policy implication: The study reveals the importance of firm reputation in firm financing decision and it gives financing policy to finance managers, that they can use reputation as an instrument of financing.  Firm reputation can help to secure the financial future of firm by mitigating the problem of stringent covenants. Limitations and future research: The time constrains and data shortage problem were faced by conducting this research and missed information of variables from balance sheets and income statements. The further study can be conducted in future by equipping all proxies of firm reputation of FMAC (Fortune Magazine’s Most Admired Companies) list and their effect on other business decisions i.e. investment and borrowing capacity

An Analysis of the Relationships among Exports, Imports, Physical Capital and Economic Growth in Pakistan

This review emphasized the relationship among capital formation, economic growth, exports and imports in case of Pakistan scenario using time series data from 1976 to 2015. Augmented Dickey Fuller Test, Johansen Co-integration, Vector error correction model and Granger Causality techniques have been used to check the relationships among exports, imports and economic growth. The results from this study show that the exports, imports, real GDP and gross fixed capital formation have a long run relationship and are co-integrated. This study uses the data of Pakistan and concludes that GDP doesn’t granger cause with the export and import while export and imports do granger cause with the GDP in the long run. Finding of the study also displays that physical capital formation has no impression over GDP. Previous study shows the positive relation among exports, imports, capital formation and economic growth while this study shows that in the long run capital formation and economic growth has no effect. Government subsidizes the exports and also increases the duty bills on imports that help boost the domestic industries manufacture the goods and motivate to produce the best quality of goods. JEL codes: F2, O4

Behavioral Biases in Investment Decision Making and Moderating Role of Investor’s Type

The conventional finance theories, including Capital Asset Pricing Model (CAPM), assume rational agents at the core of all investment decisions and overlook how real people make decisions. Practically, however, investment behavior differs and is dependent on the type of investor. This study aims to examine the behavioral biases in investment decision making by using the moderating role of investor’s type (IT). A survey-based questionnaire was designed and circulated to accumulate the feedback of small investors in the Pakistan Stock Exchange (PSX). An investment decision making was modeled with disposition effect (DE), herding (HE) effect, and overconfidence (OC) bias, whereas an IT was taken as a moderating variable. Multiple regressions were employed to test the effect of different behavioral biases on investment decision making. Twostage least square (2SLS) regressions were used for the moderating effect of IT. The findings depicted that DE, HE bias, and OC biases have a significant and positive impact on investment decisions. However, the investor prevails that in DE, such a moderating role is not present, and the positive moderating role of OC bias in the investment decision portrayed. Additionally, IT has a negative moderating role in HE bias. The outcomes postulated that active investors show more OC bias, while inactive investors are more inclined toward HE bias. The findings of the study may have important policy implications for investment analysts and policymakers in terms of educating investors and ensuring better decision making

Cultivating a greener future:Exploiting trichoderma derived secondary metabolites for fusarium wilt management in peas

This study aimed to identify efficient Trichoderma isolate(s) for the management of Fusarium wilt in peas. Four different pea germplasms (Sarsabz, Pea-09, Meteor and Supreme) were evaluated for resistance against Fusarium oxysporum in pot assay. Resistant germplasm exhibits a varying range of disease severity (23%) and percent disease index (21%), whereas susceptible and highly susceptible germplasm exhibit maximum disease severity (44–79%) and percent disease index (47–82%). The susceptible germplasm Meteor was selected for in vivo experiment. Five different Trichoderma spp. (Trichoderma koningii, T. hamatum, T. longibrachiatum, T. viride, and T. harzianum) were screened for the production of hydrolytic extracellular enzymes under in vitro. In-vitro biocontrol potential of Trichoderma spp. was assayed by percentage inhibition of dry mass of Fusarium oxysporum pisi (FOP) with Trichoderma spp. metabolite filtrate concentrations. Maximum growth inhibition was observed by T. harzianum (50–89%). T. harzianum metabolites in filtrate conc. (40%, 50%, and 60%) exhibited maximum reduction in biomass and were thus used for in vivo management of the disease. The pot experiment for in-vivo management also confirmed the maximum inhibition of FOP by T. harzianum metabolites filtrate at 60% by reducing disease parameters and enhancing growth, yield, and physiochemical and stress markers. Trichoderma strains led to an increase in chlorophyll and carotenoids (34-26%), Total phenolic 55%, Total protein content 60%, Total Flavonoid content 36%, and the increasing order of enzyme activities were as follows: CAT > POX > PPO > PAL in all treatments. These strains demonstrate excellent bio-control of Fusarium wilt in pea via induction of defense-related enzymes. The present work will help use Trichoderma species in disease management programme as an effective biocontrol agent against plant pathogens

Economic Policy Uncertainty, National Culture, and Corporate Debt Financing

Financial innovation vis-à-vis economic policy uncertainty (EPU) without due regards being given to debt financing. This paper fills this gap and unveils the dynamic role of national culture in defining debt financing via EPU. We use a sample of 3831 non-financial firms of Asian economies and employ the System Generalized Method of Moments to estimate the regression coefficients. Our findings reveal an inverse relationship between the EPU and debt financing, which suggests that debt finance mitigation strategies are successfully executed in the region. The potential reasons for this include the policies by businesses to reduce business activities and avoid the unfavorable rising financing cost through EPU. On the supply side, the rising EPU induces the banks to accelerate their interest rate due to increased default risk. Similarly, we observe that high uncertainty avoidance (UND) has a negative and significant link with debt financing due to an unpleasant behavior of corporate managers towards debt when they have an alternate source of financing instruments instead of accepting long-term obligations. However, we find that the UND and EPU interaction has a significantly positive impact on debt financing due to the rigid behavior of managers, which forces them to consider cultural traits and converts their risk-averse attitude into risk-friendly behavior. This implies that corporate managers should reflect the sensitivity of the national culture while considering debt financing

How Environmental Regulation Imperatives Introduce Innovation in Firm Financing Choice among selected Asian Economies

Green resources have gained substantial scholarly, and policy attention over the last few decades, and are considered as an effective phenomenon to resolve rising pollution and energy crises in under-analyzed economies. Therefore, it is crucial to explore the impact of environmental regulation imperatives (carbon tax rate, green energy intensity, and green productivity) on financing priorities (debt financing and equity financing). For this purpose, we use 10 years of data from the non-financial sector of 6 Asian Economies (China, India, Japan, Pakistan, Singapore, and South Korea), by employing a two-step system Generalized Method of Moments (GMM) for analysis purposes. The findings postulate that carbon tax is inversely and significantly associated with equity and debt financing due to over coating of cost. However, green energy intensity has a direct and significant connection with debt and equity financing. It means an increment in green energy sources leads to boost and strengthen the confidence of the stakeholders in investment and lending decisions. Similarly, green productivity directly and significantly affects debt and equity financing. It further means that firms achieving their goals while mitigating environmental impact leads to an improved resource efficiency, cleaning waste and pollution, and apt sustainable operations. In addition, it attracts stakeholder's intentions optimistically while making investing and lending decisions. Moreover, the analysis outputs reveal that this study brings innovation in the firm financing choice while considering environmental impact. This arrangement of variables has never been discussed before in the literature of financial economics and environmental economics

Tourism, Remittances, and Foreign Investment as Determinants of Economic Growth: Empirical Evidence from Selected Asian Economies

This research discovers how international tourism affects the economic growth of selected Asian states, e.g., Bangladesh, China, India, Pakistan, and Sri Lanka, throughout 2001–2019. To attain this objective, we have employed various regression estimation approaches, e.g., Fixed Effect Model (FEM) and Fully Modified Ordinary Least Square (FMOLS) technique. The statistical results of the applied techniques reveal that international tourism activities have a positive and significant effect on the GDP growth rate because such kinds of activities considerably contribute to creating opportunities that lead to hoist economic activities and economic growth. Moreover, an influx of tourism increases tourism activities and operations, which opens further doors to opportunities and generates revenue for the government. Similarly, the GDP per capita has been positively and significantly influenced by international tourism activities. The government and host country should emphasize the activities and operations regarding tourism and should also concentrate on the dynamic role, importance, and sensitivity of tourism operations in under-analyzed economies. This research brings a new arrangement of the variable, which has never been considered in prior literature