Impact of Political Uncertainty on Pakistan Stock Exchange (1990-1999): An Event Study Approach

Pakistan is struggling against many problems; out of which political instability and terrorism are crucial problems. These issues hindered the economic growth of the country as well as the confidence of investors. This study has investigated the impact of political events on Pakistan Stock Exchange. This paper uses a standard event study methodology. Data relating to the stock market index has been collected from the website of Pakistan Stock Exchange and relating to political events has been collected from the newspapers of Business Recorder and DAWN. A total of 18 political events was considered in the study out of which 08 events were coded as positive and other 10 were deemed negative. The first day abnormal return, a five-day cumulative abnormal return and ten day cumulative return was calculated for all of the events. This study found evidence that political events affected the stock market in Pakistan, but their impact is different considering the economic and political implications of these events. Certain events had the strongest impact on the stock market like Nuclear tests for effective defense, the Supreme Court had revoked the Presidential order and Nawaz Sharif had been reinstated, General elections held in the country and the 14th amendment because 14th amendment was related to the elimination of corruption in political parties. Overall, this study laid the foundation to make further explorations into the phenomenon of uncertainty caused by political events in relevance to the stock market in Pakistan

Proprietorship Structure and Firm Performance in the Context of Tunneling: An Empirical Analysis of Non-Financial Firms in Pakistan

This study has investigated the majority shareholder's practice to use minority shareholders’ wealth without their consent which influence the performance of firms in Pakistan from 2009 to 2020. The firm performance has been taken as an explained variable, whereas ownership concentration, inside ownership, firm size, leverage, and investment growth are considered explanatory variables. Descriptive statistics, correlation matrix, Hausman test, and random effect model have been used for empirical analysis. The study used a sample of 24 firms with a total of 288 observations to look at how ownership concentration, inside ownership, leverage, and sales growth affect firm performance. The ownership concentration, firm size, and investment growth have a positive and significant impact on firm performance, whereas inside ownership and leverage have a negative and significant influence on the performance of selected non-financial firms. The larger the gap between ownership and control, the more likely it is that company resources will be tunneled. So, it has been suggested to the securities and exchange commission of Pakistan to frame strict rules and regulations to stop the role of inside ownership because it influences firm performance adversely

The role of terrorist events in determining stock returns in Pakistan: covering most vibrant era 2003-2013

This study explains the relationship and significance of terrorism attacks and Pakistan Stock Exchange behavior. This study uses standard event study methodology and data relating to the stock market index was collected from the website of the Pakistan Stock Exchange and data relating to terrorist events was collected from the newspapers of Business Recorder and DAWN. A total of 277 terrorist events have been considered in this study. The first-day abnormal return, five-day cumulative abnormal return, and ten-day cumulative return were calculated for all of the events. Terrorist events have been analyzed year-wise and also on the bases of their category like events related to foreigners, military, politics, and general terrorist events. This study finds evidence that terrorist events affect the stock market in Pakistan. But their impact is different considering the economic and political implications of these events. Terrorist events yield mixed results where the significance of the events differed considerably in their impact on the stock market. Moreover, the abundance of terrorist events also hindered the estimation as rare events bring the element of surprise and the market adjusts to more frequent events inappropriate manner. However, terrorist events relating to politics and foreigners yield more consistent results as these events were distributed across time with longer intervals. Overall, this study lays the foundation to make further explorations into the phenomenon of uncertainty caused by terrorist events in relevance to the stock market in Pakistan. Implications and directions for future research are also provided at the end of the study

The role of terrorist events in determining stock returns in Pakistan: covering most vibrant era 2003-2013

This study explains the relationship and significance of terrorism attacks and Pakistan Stock Exchange behavior. This study uses standard event study methodology and data relating to the stock market index was collected from the website of the Pakistan Stock Exchange and data relating to terrorist events was collected from the newspapers of Business Recorder and DAWN. A total of 277 terrorist events have been considered in this study. The first-day abnormal return, five-day cumulative abnormal return, and ten-day cumulative return were calculated for all of the events. Terrorist events have been analyzed year-wise and also on the bases of their category like events related to foreigners, military, politics, and general terrorist events. This study finds evidence that terrorist events affect the stock market in Pakistan. But their impact is different considering the economic and political implications of these events. Terrorist events yield mixed results where the significance of the events differed considerably in their impact on the stock market. Moreover, the abundance of terrorist events also hindered the estimation as rare events bring the element of surprise and the market adjusts to more frequent events inappropriate manner. However, terrorist events relating to politics and foreigners yield more consistent results as these events were distributed across time with longer intervals. Overall, this study lays the foundation to make further explorations into the phenomenon of uncertainty caused by terrorist events in relevance to the stock market in Pakistan. Implications and directions for future research are also provided at the end of the study

Role of Credit Information Sharing and the Funding Cost of Banks: Evidence from the Top Ten “AA Rating” Commercial Banks of Pakistan

Purpose - The objective of the study is to investigate the relationship between the credit information sharing and the funding cost of banks of the top ten “AA rating” commercial banks of Pakistan as the Commercial banks also play a significant role in the economy of every country. Design/Methodology - In this study, panel data were analyzed from 2011 to 2017. We selected the top ten “AA rating” banks from Pakistan credit rating agency (PACRA) website, and data related to another related variables are obtained from financial statements of the respective banks. Generalized Method of Moments (GMM) statistical technique was employed to measure the relationship among related variables. Findings - The result of the study shows that there is a negative and significant relationship between credit information sharing, operation efficiency, and funding cost. On the other side, profitability has a positive and significant relationship with the funding cost of the bank. Practical Implications - To manage the funding cost policymakers must focus two key findings which are credit information sharing and operational efficiency of bank and set up a credit information sharing institutions which help to reduce information irregularity and ultimately manage the funding cost of the banks

Beyond the Balance Sheet: Analyzing the Relationship between Corporate Governance, Financial Performance, and Stock Prices in Pakistan's Non-Bank Financial Industry

This study explores the complex relationship among corporate governance, financial performance, and stock prices in Pakistan's non-bank financial industry from 2017 to 2021. Employing panel least squares and generalized method of moments for empirical analysis, our research highlights the substantial and positive correlation between stock prices and earnings per share, emphasizing the significance of profits per share. Corporate governance factors, such as board meetings, board size, and board independence, exhibit shaded impacts on stock prices. Board meetings transition from insignificance in static analysis to a negative, substantial association in dynamic analysis. Conversely, board size and board independence remain insignificant, suggesting a limited influence on stock price fluctuations. Institutional ownership emerges as a robust driver, displaying a positive impact in both static and dynamic analyses. In contrast, managerial ownership yields mixed impacts, with static analysis revealing a nonsignificant negative relationship and dynamic analysis unveiling a significant negative association. The study underlines the need to consider both static and dynamic perspectives when evaluating these relationships, highlighting the temporal dynamics and lagged effects in assessing the influence of managerial ownership on stock prices. Additionally, return on assets demonstrates an insignificant impact on stock prices in Pakistan's non-bank financial industry, consistent across both static and dynamic analyses

Impact of Political Uncertainty on Pakistan Stock Exchange (1990-1999): An Event Study Approach

Pakistan is struggling against many problems; out of which political instability and terrorism are crucial problems. These issues hindered the economic growth of the country as well as the confidence of investors. This study has investigated the impact of political events on Pakistan Stock Exchange. This paper uses a standard event study methodology. Data relating to the stock market index has been collected from the website of Pakistan Stock Exchange and relating to political events has been collected from the newspapers of Business Recorder and DAWN. A total of 18 political events was considered in the study out of which 08 events were coded as positive and other 10 were deemed negative. The first day abnormal return, a five-day cumulative abnormal return and ten day cumulative return was calculated for all of the events. This study found evidence that political events affected the stock market in Pakistan, but their impact is different considering the economic and political implications of these events. Certain events had the strongest impact on the stock market like Nuclear tests for effective defense, the Supreme Court had revoked the Presidential order and Nawaz Sharif had been reinstated, General elections held in the country and the 14th amendment because 14th amendment was related to the elimination of corruption in political parties. Overall, this study laid the foundation to make further explorations into the phenomenon of uncertainty caused by political events in relevance to the stock market in Pakistan

Black Economy, Financial Inclusion, Financial Liberalization Nexus: A Panel Analysis of Developing Countries

This study has examined the impact of financial liberalization and financial inclusion on the black economy in the case of developing countries from 2004 to 2019. The black economy is selected as an explained variable, whereas financial inclusion, financial liberalization, tax collection, level of corruption and political instability are selected as explanatory variables. Panel unit root issue has been checked with the help of PP-Fisher Chi-square (PP-FC), ADF-Fisher Chi-square (ADF-FC), Im, Pesaran, and Shin W-stat (IPSW), and Levin, Lin & Chu t* (LLC) unit root tests. The fixed-effect model has been used for examining the dependence of the black economy on selected explanatory variables. Panel Granger causality test has been applied for checking the causal relationship among the selected variables. The results show that financial liberalization has a negative and insignificant impact on the black economy. Financial inclusions, the level of corruption, and political instability have a positive and significant impact on the black economy. Tax collection has a negative and significant impact on the black economy. The results of the causality test show that most of the variables have unidirectional causality between each other. Based on estimated results, the developing countries should control corruption, political instability, hence level of financial inclusion and tax collection for the reduction of the black econom

Business or Politics: Exploring the Determinants of Policy Mix in South Asia

This study explores the determinants of policy mix in South Asia from 2000 to 2022, by using panel least squares and fixed/random effect models. We have used defense spending, health and education expenditures, corruption levels, and financial development, whereas policy mix, monetary freedom and fiscal freedom have been used as dependent variables. In South Asian nations, defense spending have statistically insignificant and adverse affect on policy mix. Conversely, higher investments in health and education show a notable positive impact on the policy mix, contributing to overall well-being and economic stability. Corruption levels and financial development do not significantly correlate with the policy mix. Our study also uncovers distinct relationships between these independent variables and fiscal and monetary freedom. Defense expenditures negatively affect fiscal freedom, while health and education spending plays a positive role. A well-educated and healthy workforce significantly enhances fiscal freedom. Corruption levels have no significant linear relationship with fiscal freedom, but financial development creates a trade-off between financial stability and fiscal freedom. Interestingly, defense expenditures positively affect monetary freedom, highlighting their role in creating a secure environment for investments. Education spending also positively impacts monetary freedom. Corruption levels do not significantly correlate with monetary freedom, but financial development negatively affects it, indicating a trade-off between financial development and monetary freedom. To enhance policy mix and economic and monetary stability in South Asia, we recommend strategically allocating more resources to the health and education sectors. Careful assessment and possible reallocation of defense budgets can reduce the fiscal burden and promote efficient resource utilization. Balancing defense spending with economic priorities can maximize its positive impact on monetary freedom, stimulating economic growth in the region