Browsing by Author "Mian Sajid Nazir"

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    Diversification and corporate performance: an evaluation of Pakistani firms
    (2008) Choudhary Slahudin; Talat Afza; Mian Sajid Nazir
    Diversification continues to be an important strategy for corporate growth and better financial performance. The relationship between the diversification strategy and profitability as well as diversification and market power has been explored by a number of studies for the developed economies. The present study is an attempt to investigate the relationship between diversification and a firm’s financial performance in the case of Pakistan. A sample of 65 firms have been categorized as diversified and non-diversified. For these firms, the financial performance in terms of risk and return has been analyzed with the return measured by Return on Assets (ROA), Return on Equity (ROE), Market Rate of Return (MKRT) and Tobin’s q, and the coefficient of variation used as the measure of risk. The results show that the non-diversified firms performed better than the diversified firms. However, the high return of non-diversified firms is accompanied by low risk and the low return of diversified firms is more risky. But there is a contrast in results based on book values and market values. The paper concludes that managers have to be careful while selecting the degree of diversification since the diversified firm may capture more market share but it can reduce its profitability
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    How leverage affects agency cost: Investigating a non-linear relationship in Pakistani firms
    (2012) Mian Sajid Nazir; Haris Khursheed Saita; Iftikhar Ahmad; Muhammad Musarrat Nawaz
    This study tests the agency cost hypothesis that use of debt decreases agency cost. This relationship has been tested using data of 265 non-financial companies listed on Karachi stock exchange during the period of 2004-2009. Assets utilization and General& Administrative expense ratio are used as proxy to measure agency cost. As suggested by Jensen and Meckling (1976) that relationship between leverage and agency cost may not be monotonic and excessive high leverage may have positive effect on agency cost. To test this possibility non-linear regression model has also been included. We find evidence in support of agency cost hypothesis. Results show that total debt reduces agency cost. We also find some evidence of non-linear relationship between total debt and agency cost. In Pakistan nonfinancial companies at total debt ratio of above 60% the diminishing effect of leverage on agency cost starts to diminish and regression results give some evidence that further increase in leverage increases total agency cost. This study also provides implication for the debt holders as well as the policy makers on the use of debt in total financing of a firm.
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    The impact of financial leverage on agency cost: Empirical evidence from non-financial sector of Pakistan
    (Scienec Record, 2012) Mian Sajid Nazir; Haris Khursheed Saita; Iftikhar Ahmad; Muhammad Musarrat Nawaz
    This study tests the agency cost hypothesis that use of leverage decreases agency cost. This relationship has been tested using data of 265 non-financial companies listed on Karachi stock exchange during the period of 2004-2009. General & admin expense to sales ratio is used as proxy to measure agency cost. Total, short term, long term and contractual debt ratios have been used separately to test agency cost hypothesis. The results of pooled and panel regression models show that general &admin expense ratio is negatively related to all four leverage ratios. Thus, this study givesevidence in support of agency cost hypothesis that use of debt in capital structure reduces agency cost.