Stock Market Response to Policy Announcement: Evidence from Banking Sector of Pakistan

Monetary policy announcement is important decision which affects the economy. The aim of this study is to identify the impact of monetary policy announcement on stock market in Pakistan for financial year 2014-2015. This is the unique year for studying the impact of announcement on bank’s stock prices, as interest rate has been changed in 4 monetary policies while it remained stable in other announcements. This specific feature can help to uncover the phenomenon. Event study approach has been used to analyze the impact of policy announcement on stock returns. The event window of 15 days is constructed with -7 (pre announcement days) and +7(post announcement days) while 0 is the event day. All commercial banks is the population of study and sample size of 14 commercial banks listed in KSE 100 index. Around the event window, abnormal returns calculated by taking difference of actual return and expected return. Market model is used to calculate the expected returns. Aggregated abnormal return AAR and cumulative abnormal returns CAAR are calculated to find the impact with in event window and across the events window. The results show significant impact of all monetary policy announcements on banks stock returns. Keywords: Monetary Policy Announcement, Stock Return, Event Study, Banking Sector, KSE 100 Inde

How Consumer Confidence, Corruption and Credit Rating Effect the Exchange Rate: Emerging Market Perspective

The paper empirically examines whether the international rating influences the rate of exchange of an economy in the long run? The paper employs Autoregressive Distributed Lag (ARDL) Bounds testing methodology on the exchange rate of China and contemporary international rating, using time series data from 1996Q1 to 2016Q4. The empirical analysis confirms the presence of a cointegration relationship between country rating and the exchange rate. To be more specific; corruption index, credit rating, and inflation are significantly and negatively cointegrated with the exchange rate of China. Conversely, consumer confidence is uncorrelated with the exchange rate over the long run. The paper focuses only on the exchange rate of CNY-USD; this may limit the generalizability of results for exchange rate with other nations. Nevertheless, the results add to the exchange rate determinants literature by including country-rating indicators in the analysis. Prior literature documents that there is some relationship between inflation and exchange rate. This research is novel in the application of robust ARDL and bounds testing to examine the long and short-run association of country rating of China with its exchange rate, after controlling for inflation

Knowledge Management and Sustainable Firms Growth: An Evidence from SMEs Sector of Pakistan

The main drive for this research was to investigate the relationship between knowledge management (KM) and sustainable firms’ growth in SMEs sector of Pakistan. Moreover, the research examined the mediating role of product and process innovations on the association of knowledge management and sustainable firms’ growth. A self-administered survey was structured and employed to gather the data from 218 garments related SMEs. The study employed SEM to measure direct and indirect effects. Findings of the study indicates that knowledge management has a positive and significant influence over sustainable firms’ growth while both product and process innovations significantly mediated the knowledge management and sustainable firms growth relationship. Current research findings offer valuable implications concerning the importance of KM in enhancing and facilitating process and product innovations for sustainable firms’ growth. This is a pioneer study for employing a unified model that illustrates the relationships among multiple variables pertaining to KM

Vacillating Behavior of TOM Effect and Adaptive Market Hypothesis: A Firm Level Evidence from Emerging Stock Market of Pakistan

Through the current study we amplify the available literature on AMH (Adaptive Market Hypothesis) and calendar anomalies because this is the first study of its nature which links TOM effect with AMH which allows the behavior of conventional TOM-effect to swing over time. To fulfill the drive, study investigates daily mean return from PSX of Pakistan using data of 107 firms individually over a longer period of time ranging 1996-2015. To discover the time variation in the levels of predictability of TOM returns, study uses four different sub-samples covering identical length of observations of five years each to investigate how TOM effect has performed over time. There are few studies in the literature investigating TOM effect at firm level and very rare studies examining TOM effect through (AMH), so the current study may be of importance and interest to finance researcher, academicians and practitioners alike. To elucidate the volatility and its varying nature, the study applies GARCH (1,1) regression model which enables for time-variation in volatility of security returns. Kruskal-Wallis test-statistic is used to handle non normality in the equity return series. We find that with the passage of time performance of TOM effect evolves, consistent and aligned with the assertion of AMH. Finally, this study exhibits that behavior of TOM effect is well elucidated by Adaptive Market Hypothesis (AMH) than conventional Efficient Market Hypothesis (EMH). The results may be used for better decision making for investors and the article complements studies on market efficiency and TOM effect in developing and developed countries

Analysis of Energy Crisis, Energy Security and Potential of Renewable Energy: Evidence from Pakistan

Over the last thirty years, Asian countries have become a chief player in the worldwide scene. Pakistan is facing an acute energy disaster since last decade that impacts on social and economic development. Sustainable energy supply is an essential feature for the economic growth of any society. From the last five years, Pakistan is facing a shortfall between 4,000-5,000 megawatt. This study inspects the association between energy security, energy crisis, energy demand, energy supply, and renewable potential in Pakistan. It also evaluates the final energy demand-supply gap, provincial renewable energy distribution, sectorial distribution, and policy recommendation for future energy. For this study, we applied renewable and non-renewable energy scenarios during 2014-2035 and Market-Allocation method to prove the energy situation in Pakistan. The outcomes show that renewable resources are the best option in reducing energy risk, import cost, and enhance environmental and economic sustainability. With the objectives of our key findings, targeted suggestions and policies are given

Impact of Financial Literacy and Parental Socialization on the Saving Behavior of University Level Students

This is an explanatory study on the impact of financial literacy and parental socialization on the saving behavior of university level students. Using primary data collection method, 400 questionnaires were distributed to the students of universities across Pakistan. Pearson correlation and multiple regression analysis are employed by using SPSS. Our results demonstrate that financial literacy and parental socialization positively influence the saving behavior of students. Our result revealed that the students who have financial literacy exhibit more saving behavior as compared to others who do not have financial knowledge. It is also concluded that the student willingness to save increased due to receiving financial education from their parents

Does Dividend Announcement Generate Market Signal? Evidence from Pakistan

This study is aimed at investigating the signaling effect of cash dividend announcements by employing the standard event methodology over the companies listed on Karachi Stock Exchange. The companies are randomly selected from different sectors that have announced cash dividends during calendar year 2010 and total 30 companies are included in the study. The standard event methodology is applied to explore the impact of cash dividend announcements upon stock returns and an event window of 15 days with dividend announcement date as the event day is constructed. The results show that the average abnormal returns, by and large, remained positive and statistically significant in post-event window days. The results of study tend to support dividend signaling hypothesis indicating that the dividend announcement may be used as a tool to generate positive signals in the market. Keywords: Dividend Announcements, Event Window, Abnormal Returns and t-Test JEL Classifications: F65; G

Do Exchange RateVolatility Effects Foreign Direct Investment? Evidence from Selected Asian Economies

ABSTRACT The study is aimed at investigating the effect of volatility in exchange rate upon foreign direct investment in Asian economies. The sample is selected from four main regions of Asia and the countries of Pakistan, India, Bangladesh and Sri-Lanka are selected for study from the South-Asian region whereas from the Southeast Asian region Malaysia, Indonesia, Singapore and Thailand are selected. Similarly, from the East Asia the China, Japan and South Korea are selected while Turkey, Iran and Israel are selected from the West Asia. The GARCH approach is employed to examine the volatility in exchange rate and its effect upon foreign direct investment is investigated by using the Autoregressive Distributed Lag (ARDL) approach to Cointegration and Error Correction Model, developed by Pesaran

Relationship Between Accounting Conservatism and Investment Efficiency with the Moderating Role of IFRS Adoption in Pakistan

ABSTRACT This study investigated the mandatory role of IFRS adoption in the association of accounting conservatism and investment efficiency in Pakistan. The study applied the model of Basu's (1997) to measure the conditional accounting conservatism for timely recognition of expected loss and gain. For empirical analysis, the study took a sample of 165 firms listed at Pakistan Stock Exchange and employed panel data methodology over the data of 2008-2017. Firms size, leverage, return on assets, and growth are taken as control variables to assess the relationship between accounting conservatism and investment efficiency. Findings of the study revealed that conditional accounting conservatism significantly affected the firms’ investment efficiency with the mandatory adoption of IFRS in Pakistan. IFRS adoption enhanced the firms’ investment efficiency and motivated to adopt the principle of accounting conservatism for recognizing the expected losses in timely manner in order to achieve investment efficiency. Timely recognition of expected losses played an important role in reducing agency problems and asymmetric information. In Pakistani setting, it is the pioneer study which highlighted the importance of accounting conservatism in protecting the surplus resources of investors and enhancing the overall investment efficiency under mandatory adoption of IFRS. These findings offer policy implications for focusing on the adaptation of IFRS in Pakistan

Financial Leverage, Distress, and Firms Performance: Global and Local Perspective

Purpose: This study examined the effect of financial leverage on firms’ performance. The study examined the phenomenon in the background of financial crisis. Methodology: For detailed investigation, the study selected 1879 firms from different countries of the world. In the meantime, the study selected a sample of 263 firms from domestic economy of Pakistan. Firm level secondary data of 2005-2012 were used for analysis purposes. Panel regression model is applied, and interactive dummy were added to probe the effect of leverage in crisis period. Findings: The study found a negative effect of leverage on firms’ performance. During the crisis period, leverage remained helpful to absorb the negative effect of crisis on firms selected from different countries. The similar trend for firms in Pakistan was, however not observed. Based on study results, it is concluded that the leverage plays a substantial role in firms and extreme care is needed in its adjustment. Furthermore, behaviour and dynamics of firms in Pakistan are different from many other countries. Implications: The local dynamics and circumstances should be considered in designing the capital structure of the firms.