School of Business and Economics (SBE)

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Understanding sensitivity of investment to internal funds and their subsequent effect impact on firm performance in Pakistan
(University of Management and Technolog, 2017) Ihtesham, Uzma
This study intends to find the suitable model for financial constraint which suits Pakistani environment best. Through empirical evidence it is proved that SA Index works best in developing economy. On the basis of SA Index, 98 firms are financially constrained and 125 are unconstrained. the study includes KSE listed non financial firms. The time frame for the study is 10 years (2005-2014). The second aim of the study is to find the sensitivity of investment to internal funds and asset sales and the impact of financial constraints on it. Focusing on capital expenditure and income from asset sales, the study finds a negative relation between growth opportunities and asset sales. Income from asset sales is significant determinant of capital expenditure (investment) and firms invest more when funds are generated from internal sources. Lastly the study investigates that financially constrained firms perform poorly when income is generated from asset selling unlike unconstrained firms. Unconstrained firms have a positive and significant relation with performance and asset sales.