Working Capital Management Efficiency of Cement Sector of Pakistan

The corporate finance literature has traditionally focused on the study of long-term financial decisions. Researchers have particularly examined investments, capital structure, dividends or company valuation decisions, among other topics. However, short-term assets and liabilities are important components of total assets and needs to be carefully analyzed. Management of these short-term assets and liabilities warrants a careful investigation since the working capital management plays an important role for the firm’s profitability and risk as well as its value. It requires continuous management to maintain proper level in various components of working capital i.e. cash, receivables, inventory and payables etc. The present study is an attempt to evaluate the efficiency of the working capital management of cement sector of Pakistan for the period 1988-2008. Instead of employing the traditional ratios; working capital efficiency has been measured in terms of utilization index, performance index and total efficiency index as suggested by Bhattacharya (1997). This paper also tests the speed of achieving the target level of efficiency by an individual firm during the period of study using industry norms as the target level of efficiency. Findings of the study indicate that the cement sector as a whole did perform well during the study period

Environmental consequences of economic growth and foreign direct investment: evidence from panel data analysis

This paper is aimed at investigating non-linear relationship between foreign direct investment and environmental degradation using panel data of 110 developed and developing economies. The results indicated that environmental Kuznets curve exists and foreign direct investment increases environmental degradation.Economic Growth, FDI, Environment

DETERMINANTS OF TRADE CREDIT FINANCING: CASE OF MANUFACTURING FIRMS LISTED IN PAKISTAN

AbstractThis paper investigates the determinants of trade credit financing used by listed manufacturing firms in Pakistan. For this purpose, balanced panel data are used that consist of 327 manufacturing firms listed on KSE Pakistan and time period from 2005 to 2013. Results of system GMM estimator applied on dynamic panel data set reveal that trade credit financing used by listed manufacturing firms is significantly affected by its first lag, trade credit extended to customers, availability of short term bank credit, their sales growth, profitability, creditworthiness, collateral and financial leverage. Positive coefficient for first lag of trade credit financing shows that firms’ trade credit financing is dynamic. The speed of making adjustment in trade credit financing is found relatively high due to low cost of making adjustment. Findings of this study has managerial implication for trade credit financing decision of listed manufacturing firms. For future research, investigation of the effect of financial development on trade credit financing behavior of firms is proposed

Dividend Policy and Corporate Governance Quality: An Empirical Investigation

The study intends to investigate the relationship between corporate governance quality and dividend policy in Pakistan. The sample of the study covers Karachi Stock Exchange 100 index listed companies from the period of 2008 to 2011. The results have confirmed the support of outcome model in Pakistan which confirms that firm’s dividend policy moves with the direction of corporate governance quality. Moreover, there are positive associations between size of the firms, profitability and dividend policy. Finally, investment opportunities and leverage are negatively related with dividend policy. These results, taken as a whole, indicate that better governed firms used to pay more dividends and it implies that firm-level corporate governance and country-level investor protections are complements to each other rather than substitution

Capital Structure, Business Strategy and Firm’s Performance: Evidence from Pakistan

The core objective of the current study is to explore the moderating role of business strategy on the established relationship between capital structure and firm performance by selecting the data of 333 non-financial firms of Pakistan over the period of 2006 to 2013. The empirical results indicate that debt financing is imperative both for the accounting and market performance of the selected firms while attempting to pursue the cost leadership strategy. Moreover, as the firms follow the hybrid strategy, product differentiation strategy and firms with unclear strategic situation, the benefits of debt decreases and incurs a significant performance penalty

Dividend Policy and Corporate Governance Quality: An Empirical Investigation

The study intends to investigate the relationship between corporate governance quality and dividend policy in Pakistan. The sample of the study covers Karachi Stock Exchange 100 index listed companies from the period of 2008 to 2011. The results have confirmed the support of outcome model in Pakistan which confirms that firm’s dividend policy moves with the direction of corporate governance quality. Moreover, there are positive associations between size of the firms, profitability and dividend policy. Finally, investment opportunities and leverage are negatively related with dividend policy. These results, taken as a whole, indicate that better governed firms used to pay more dividends and it implies that firm-level corporate governance and country-level investor protections are complements to each other rather than substitution

Capital Structure, Business Strategy and Firm’s Performance: Evidence from Pakistan

The core objective of the current study is to explore the moderating role of business strategy on the established relationship between capital structure and firm performance by selecting the data of 333 non-financial firms of Pakistan over the period of 2006 to 2013. The empirical results indicate that debt financing is imperative both for the accounting and market performance of the selected firms while attempting to pursue the cost leadership strategy. Moreover, as the firms follow the hybrid strategy, product differentiation strategy and firms with unclear strategic situation, the benefits of debt decreases and incurs a significant performance penalty

Foreign Currency Derivatives and Firm Value

The corporations, all over the world, are using derivative instruments to hedge their Exchange Rate exposure arises from increased globalization and market determined Exchange Rates. Despite of this, most of the studies explore the impact of Foreign Currency Derivative (FCD) usage and extent of such usage on firm value in developing countries, whereas very few examines this relationship in developing countries. Current study, therefore, attempts to examine the relationship between FCD instruments and firm value by using the data of 181 Pakistani non-financial firms for the period 2004-2010. Controlling firm specific variables, empirical findings support value increasing effects of usage and extent of such derivative usage. Detailed analysis indicates that corporations with exchange rate exposure, measured by Foreign Sales, can enhance their firm value by using FCD instruments. The findings remain same for alternative specifications like endogeneity and self-selection problem, that use of FCD instruments gives value premium effects on Pakistani firms

Does defence spending impede economic growth? cointegration and causality analysis for Pakistan

This study revisits the relationship between defence spending and economic growth using Keynesian model in Pakistan by applying ARDL bounds testing approach to cointegration for long run and error correction method for short span of time. Empirical evidence suggests a stable cointegration relationship between defence spending and economic growth. An increase in defence spending retards the pace of economic growth confirming the validation of Keynesian hypothesis in the country. Current economic growth is positively linked with economic growth in previous period while rise in nonmilitary expenditures boosts economic growth. Interest rate is inversely associated with economic growth. Finally, unidirectional causality running from military spending to economic growth is found.Defence Spending, Economic Growth, Cointegration, Causality, Pakistan

Whether Companies Need to be Concerned about Corporate Social Responsibility for their Financial Performance or Not? A Perspective of Agency and Stakeholder Theories

Present study used the theoretical framework of both the Agency and Stakeholder theories in order to empirically investigate the importance of Corporate Social Responsibility (CSR) for the financial performance (FP) of firm both in the short and long run. According to the agency theory approach core motive of the company’s existence is to maximize their owner’s wealth and therefore spending on other stakeholders in the form of CSR is an additional cost that leads to decrease in the FP. Contrary to this, Stakeholder theory argues that firms should satisfy the social needs of various stakeholders and perform CSR as it protects the firm from negative confrontations and boycotts of their stakeholders that reduces the operating cost and boosts the financial performance. A sample of 76 Pakistani manufacturing firms listed at Karachi Stock Exchange has been used for the time period ranged from 2009-2012. A series of tests like F-test, LM-test and Hausman-test have been applied to identify optimum panel data model and Random model found to be the appropriate one. Results of Generalized Least Square Regression results revealed that CSR has a positive impact not only on the short term financial performance of Pakistani manufacturing firms but also helped them to maintain the sustainable long term financial performance