Determinants of corporate hedging policies and derivatives usage in risk management practices of non-financial firms

Derivatives are the major icon among risk management practices. Firms usually use derivatives to hedge their foreign exchange and interest rate risk. This study aims to examine the determinants’ of corporate hedging policies and derivative usage in risk management particularly with respect to Pakistan, as the political and economic conditions in Pakistan are highly volatile which intends the corporations to handle and mitigate their risk through channelizing the derivatives. Secondary data of 75 non financial firms listed in Karachi Stock Exchange was collected over the period 2007-2011 – to regress empirically – for achieving the aim of this study. Mann-Whitney U test was used to distinguish the derivative user and non user. Findings of this test characterize users as large size, higher growth opportunities, cash flow volatility, foreign exchange and interest rate exposure. Moreover this study finds that there is a significant relationship between the use of derivatives and foreign purchase, liquidity, firm growth and size. Our findings suggest that derivative users have competitive edge over the non user, as they get economies of scale and proper risk management through using these kinds of derivative instruments

Determinants of corporate hedging policies and derivatives usage in risk management practices of non-financial firms

Derivatives are the major icon among risk management practices. Firms usually use derivatives to hedge their foreign exchange and interest rate risk. This study aims to examine the determinants’ of corporate hedging policies and derivative usage in risk management particularly with respect to Pakistan, as the political and economic conditions in Pakistan are highly volatile which intends the corporations to handle and mitigate their risk through channelizing the derivatives. Secondary data of 75 non financial firms listed in Karachi Stock Exchange was collected over the period 2007-2011 – to regress empirically – for achieving the aim of this study. Mann-Whitney U test was used to distinguish the derivative user and non user. Findings of this test characterize users as large size, higher growth opportunities, cash flow volatility, foreign exchange and interest rate exposure. Moreover this study finds that there is a significant relationship between the use of derivatives and foreign purchase, liquidity, firm growth and size. Our findings suggest that derivative users have competitive edge over the non user, as they get economies of scale and proper risk management through using these kinds of derivative instruments

Empirical Examination for Operational and Credit Risk Perspective – A Case of Commercial Banks of Pakistan

The objective of this study is to evaluate the factors that influence credit and operational risk in commercial banks. Financial data was collected from 11 commercial banks of Pakistan listed in Karachi Stock Exchange (KSE) over the period of 2009-2014. Different statistical tools and techniques are applied to find the cause and effect relationship for the underconsideration issue.The banking sector have faced the rivalry with other financial institutions to grab the attention of the customers and having a considerable competition with other banks. The result has shown that operational risk had significant but negative relation with NPL and operating efficiency but positive and highly significant relationship with bank size. Credit risk had significant and positive regression values with gearing ratio. NPL, operating efficiency and bank size had negative and insignificant relation with credit risk. There was no relationship between gearing ratio and operational risk. However the bottomline of this research suggests that banks play an important role in providing the finance for many of the businesses. Moreover these institutions need more managerial grip and vigilant attitude towards the risk management

Exchange Rate, Market Size and Human Capital Nexus Foreign Direct Investment – A Bound Testing Approach for Pakistan

This study investigates the role of exchange rate, market size and human capital for attracting foreign direct investment (FDI). In this regard, time series data on annual basis has been collected for the period 1985–2010 and an Augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) unit root tests are utilized to determine the stationarity of the variables. An autoregressive distributed lag (ARDL) bounds testing approach to co-integration was applied as all the variables in the model are first level stationary,e.g. I(1). The empirical findings of this study confirm the long run relationship among the variables. However, market size and human capital have strong positive and significant impact – in short- and long-run – for attracting FDI but exchange rate shows negative impact in this regard. The coefficient ECM is negative and significant, which means that it converges towards equilibrium. CUSUM and CUSUMSQ tests were utilized to test the model’s stability and the plots of each test did not cross the lines of critical value, which indicates the stability of the estimated parameters and this model can be used by Pakistan in policy and decision making. For achieving higher economic growth and economies of scale, the country should concentrate on the ingredients of this study so that it could attract more FDI as compared to the other countries

Empirical Examination for Operational and Credit Risk Perspective – A Case of Commercial Banks of Pakistan

The objective of this study is to evaluate the factors that influence credit and operational risk in commercial banks. Financial data was collected from 11 commercial banks of Pakistan listed in Karachi Stock Exchange (KSE) over the period of 2009-2014. Different statistical tools and techniques are applied to find the cause and effect relationship for the underconsideration issue.The banking sector have faced the rivalry with other financial institutions to grab the attention of the customers and having a considerable competition with other banks. The result has shown that operational risk had significant but negative relation with NPL and operating efficiency but positive and highly significant relationship with bank size. Credit risk had significant and positive regression values with gearing ratio. NPL, operating efficiency and bank size had negative and insignificant relation with credit risk. There was no relationship between gearing ratio and operational risk. However the bottomline of this research suggests that banks play an important role in providing the finance for many of the businesses. Moreover these institutions need more managerial grip and vigilant attitude towards the risk management

Self-reported health and smoking status, and body mass index: a case-control comparison based on GEN SCRIP (GENetics of SChizophRenia In Pakistan) data

Introduction Individuals with schizophrenia are at a high risk of physical health comorbidities and premature mortality. Cardiovascular and metabolic causes are an important contributor. There are gaps in monitoring, documenting and managing these physical health comorbidities. Because of their condition, patients themselves may not be aware of these comorbidities and may not be able to follow a lifestyle that prevents and manages the complications. In many low-income and middle-income countries including Pakistan, the bulk of the burden of care for those struggling with schizophrenia falls on the families.Objectives To determine the rate of self-reported physical health disorders and risk factors, like body mass index (BMI) and smoking, associated with cardiovascular and metabolic disorders in cases of schizophrenia compared with a group of mentally healthy controls.Design A case-controlled, cross-sectional multicentre study of patients with schizophrenia in Pakistan.Settings Multiple data collection sites across the country for patients, that is, public and private psychiatric OPDs (out patient departments), specialised psychiatric care facilities, and psychiatric wards of teaching and district level hospitals. Healthy controls were enrolled from the community.Participants We report a total of 6838 participants’ data with (N 3411 (49.9%)) cases of schizophrenia compared with a group of healthy controls (N 3427 (50.1%)).Results BMI (OR 0.98 (CI 0.97 to 0.99), p=0.0025), and the rate of smoking is higher in patients with schizophrenia than in controls. Problems with vision (OR 0.13 (0.08 to 0.2), joint pain (OR 0.18 (0.07 to 0.44)) and high cholesterol (OR 0.13 (0.05 to 0.35)) have higher reported prevalence in controls. The cases describe more physical health disorders in the category ‘other’ (OR 4.65 (3.01 to 7.18)). This captures residual disorders not listed in the questionnaire.Conclusions Participants with schizophrenia in comparison with controls report more disorders. The access in the ‘other’ category may be a reflection of undiagnosed disorders