97 research outputs found
Working Capital Management Efficiency of Cement Sector of Pakistan
Full text linkThe 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
Estimating Total Factor Productivity and Its Components: Evidence from Major Manufacturing Industries of Pakistan
Full text linkThis paper estimates the trend in total factor productivity growth for eleven major manufacturing sub-sectors/industries listed on Karachi Stock Exchange. 1998 to 2007 Malmquist total factor productivity growth indices have been calculated using nonparametric Data Envelopment Analysis which also shows TFP growth sources including efficiency change and technical change. The results of this study are showing a mixed trend for all manufacturing sub-sectors/industries in terms of TFP, technical efficiency change and technological change. Cement and Oil and Gas marketing sectors depict a relatively stable position. Most of the manufacturing industries have gained, in terms of technical efficiency but the technical change is putting a negative affect on the productivity growth except for a few industries.Data Envelopment Analysis, Manufacturing Sector, Malmquist Productivity Index, Total Factor Productivity, Technical Efficiency Change, Technical or Technological Change, Pakistan
Does managerial behavior of managing earnings mitigate the relationship between corporate governance and firm value? Evidence from an emerging market
No full textThe relationship between corporate governance and managerial choices for value creation is a topic of continuing interest for researchers. One of most significant managerial decisions that affect value is Discretionary Earnings Management (DEM) which is the judgmental adjustments in firm's reported accounting earnings by managers to upsurge firm value temporarily. Effective corporate governance structure to control this opportunistic behavior of mangers can presumably make accounting earnings more reliable and more informative for the stakeholders and hence, increase firm value. Based on 1944 firm year observations for listed firms in Pakistan, this study aims at to analyze the role of corporate governance in enhancing firm value along with the moderating role of DEM using models proposed by Kasznik (1999) and Beatty, Ke, & Petroni (2002) for detecting earnings management practices of managers. The results report that corporate governance significantly and positively influences firm value confirming the positive role of corporate governance in mitigating agency problem and enhancing the firm value. Moreover, corporate governance mechanisms may mitigate the managers’ opportunistic behavior of manipulating the reported earnings. Furthermore, the results report that the behavior of managers is opportunistic towards managing earnings and they are destroying the current and subsequent firm value by manipulating the reported accounting earning. Finally, this opportunistic behavior of managers to manipulate earnings is negatively moderating the well-established positive relationship of corporate governance and firm value. Keywords: Corporate governance, Firm value, Discretionary earnings management, Opportunistic behavior, Kasznik model, Moderating effec
Capital Structure, Business Strategy and Firm’s Performance: Evidence from Pakistan
Full text linkThe 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
Full text linkThe 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
Corporate derivatives and foreign exchange risk management
No full textPurposeThe purpose of this paper is to identify the factors affecting firms' decision to use foreign exchange (FX) derivative instruments by using the data of 86 non‐financial firms listed on Karachi Stock Exchange for the period 2004‐2007.Design/methodology/approachRequired data were collected from annual reports of listed firms of Karachi Stock Exchange. Non‐parametric test was used to examine the mean difference between users and non‐users operating characteristics. Logit model was applied to analyze the impact of firm's financial distress costs, underinvestment problem, tax convexity, profitability, managerial ownership and foreign exchange exposure on firms' decision to use FX derivative instruments for hedging.FindingsResults explain that firms having higher foreign sales are more likely to use FX derivative instruments to reduce exchange rate exposure. Moreover, financially distressed large‐size firms with financial constraints and fewer managerial holdings are more likely to use FX derivatives.Research limitations/implicationsIncomplete financial instrument disclosure requirements restricted researchers to using binary variable as a dependent variable instead of notional value or fair value of derivative usage.Practical implicationsThe study shows that in the presence of amateur derivative market, Pakistani corporations possessing higher agency costs of debt, agency costs of equity, and financial constraints will benefit more by defining hedging policies coherent with the firm's investment and financing policies in order to enhance firm value.Originality/valueUntil now, no earlier empirical study focused on the determinants of a firm's hedging policies in Pakistan, in the presence of volatile exchange rates,. The current study, therefore, attempts to identify the factors which affect the firm's decision to use derivative instruments for hedging FX exposure of non‐financial firms in Pakistan.</jats:sec
Corporate derivatives and foreign exchange risk management: A case study of non-financial firms of Pakistan
No full textPurpose – The purpose of this paper is to identify the factors affecting firms' decision to use foreign exchange (FX) derivative instruments by using the data of 86 non-financial firms listed on Karachi Stock Exchange for the period 2004-2007. Design/methodology/approach – Required data were collected from annual reports of listed firms of Karachi Stock Exchange. Non-parametric test was used to examine the mean difference between users and non-users operating characteristics. Logit model was applied to analyze the impact of firm's financial distress costs, underinvestment problem, tax convexity, profitability, managerial ownership and foreign exchange exposure on firms' decision to use FX derivative instruments for hedging. Findings – Results explain that firms having higher foreign sales are more likely to use FX derivative instruments to reduce exchange rate exposure. Moreover, financially distressed large-size firms with financial constraints and fewer managerial holdings are more likely to use FX derivatives. Research limitations/implications – Incomplete financial instrument disclosure requirements restricted researchers to using binary variable as a dependent variable instead of notional value or fair value of derivative usage. Practical implications – The study shows that in the presence of amateur derivative market, Pakistani corporations possessing higher agency costs of debt, agency costs of equity, and financial constraints will benefit more by defining hedging policies coherent with the firm's investment and financing policies in order to enhance firm value. Originality/value – Until now, no earlier empirical study focused on the determinants of a firm's hedging policies in Pakistan, in the presence of volatile exchange rates,. The current study, therefore, attempts to identify the factors which affect the firm's decision to use derivative instruments for hedging FX exposure of non-financial firms in Pakistan.Foreign exchange, Foreign exchange derivatives, Foreign exchange exposure, Hedging, Non-financial firms, Pakistan, Risk management
Trends in Inequality in Pakistan between 1998-99 and 2001-02
Full text linkAlthough there has been a much debate on poverty in Pakistan in recent time, the discussion on inequality remained limited. Poverty and inequality are closely linked—for a given mean income, the more unequal the income distribution, the larger the percentage of the population living in income poverty. Thus, incomes at the top and in the middle of the distribution may be just as important to us in perceiving and measuring poverty as those at the bottom. It is, thus, important to monitor the whole income distribution rather than merely the bottom of distribution. The issue of income inequality in Pakistan has been important in the policy discussions since the early 1960s. Since then, a number of attempts have been made to estimate the income or expenditure inequality using the Household Income and Expenditure Survey (HIES) data. However, a perception of increasing absolute poverty in Pakistan has shifted the focus of studies from inequality (or relative poverty) to absolute poverty. Consequently, a number of attempts have been made by various authors/institutions to estimate the poverty in Pakistan in the 1990s. The debate on trends in poverty during the 1990s—an era of stabilisation and structural adjustment has been wide-ranging in Pakistan. However, there is no discussion on the changes in income distribution from the policy and institutional reforms. World Bank (2003); FBS (2001) and Kemal (2003) are only three exceptions. While the former two studies report Gini Coefficients in their studies on absolute poverty in Pakistan without explaining its variations over time, the latter study is a comprehensive review on the income distribution in Pakistan. It is this context that guided the author to evaluate the trends in inequality in Pakistan using the most recently available household data sets—PIHS 1998-99 and 2001-02. The results for the year 2001-02 are being presented for the first time, which should be useful to
Determinants of Capital Structure across selected Manufacturing sectors
No full textAbstract The present study examines the industry specific attributes of firms in Automobile, Engineering, and Cable and Electrical Goods Sectors affecting the determinants of capital structure and validates the results with Booth et. al. (2001) and Rajan and Zingales (1995
Role of Institutional Shareholders’ Activism in Enhancing Firm Performance: The Case of Pakistan
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