Departement of Finance

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https://escholar.umt.edu.pk/handle/123456789/509

To be the most innovative and dynamic department recognized for its high quality and creative methodology to disseminate financial knowledge and skills in individuals who will take leadership roles to tackle ever changing financial and economic markets around the globe.

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An analysis of oil price volatility using var: evidence from Pakistan
(Lahore Journal of Business, 2015) Abdul Rafay; Saqib Farid
Oil is a crucial economic input and Pakistan’s growth, production levels, and price levels are affected significantly by oil price volatility. This paper captures the impact of oil price shocks on Pakistan’s economy by considering variables such as gross domestic product, the wholesale price index, and large-scale manufacturing index. Our analysis is based on vector autoregression and the results are in line with similar studies. We also determine the precise short-term or long-term impact of oil price volatility on the relevant variables.
Corporate Governance Mechanism to Improve Disclosure Quality of the Firms:
(University of Management and Technology, 2018) Ul Haq, Naveed
The empirical investigations report twelve closely related and important corporate governance mechanisms that are related to the increased This thesis investigates the determinants of the disclosure quality of financial statements with respect to the corporate governance board structures in ASEAN countries. Using a sample of top 50 companies from Malaysia, Indonesia, Thailand, and Singapore for the period of 2011-2015, this thesis provides evidence that two board structures are different in terms of disclosure quality of financial statements. level of the disclosure quality of financial statements. Some CG mechanism is same for one-tier and two-tier boards, and some are different. The board size, board expertise, board meetings, board diversity, timeline, young CEO and audit expertise are associated with increased disclosure quality of both types of board structures. The female board members, free cash flows, and audit committee size are positively related to disclosure quality of one-tier while board power and block holders have a positive impact on the disclosure quality of two-tier boards only. The dual role of CEO is associated with a decrease of disclosure quality of both board structures, while older age CEO’s have a negative impact on the disclosure quality of two-tier boards only. Moreover, the study finds no relationship between board independence, CEO tenure, audit committee independence, audit quality and the disclosure quality of both types of board structures.
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
Dynamism in Financing Decision Patterns: A Life Cycle Approach
(2017-04-05) Sumera, Anis
This empirical study is conducted to analyse the dynamics of financing decisions for Pakistani non-financial firms. The approach to investigate the problem is life cycle approach incorporating dynamic panel data methodology. Three life cycle stages; growth, maturity and decline are selected for analysis. The basic criteria for samples are information about IPOs. Five hypotheses are postulated for the study which is about life cycle impact, reverse of life cycle impact, reputational effect, in search for reputational effect and pecking order theory. Hypotheses H1a & H1b state that in the beginning firms use more equity finance and then gradually rebalance this with debt. In hypotheses H2a & H2b reverse of H1a & H1b are analysed. In hypothesis H3, as pecking order theory predicts, importance of profitability is considered and utilization of internal finance against debt and equity is studied. Results illustrate that the impact of life cycle theory, reputational effect and pecking order theory are present for Pakistani firms. In the growth stage firms mostly rely upon equity finance and after getting maturity they augment use of debt financing. Pecking order theory is confirmed too. Keywords: Life cycle stages; Financing decision patterns; Pecking order theory; Cash flows JEL classification: G30; G32; G35
Human capital: is it beneficial for trade openness in Pakistan?
(IDOSI Publications, 2013) Akeela Maryam; Muhammad Shahid Hassan
This study is an attempt to examine the impact of human capital; exchange rate and gross national income on trade openness in Pakistan for the period from 1976 – 2011. The findings of the study conclude that economic growth in the form of per capita gross national income has positive and significant impact on trade openness in both short run and long run in Pakistan indicating that growth led trade hypothesis works in Pakistan in the both periods. Moreover; it has also found that human capital in the form of per capita education expenditures have significant and positive impact on trade openness indicating that human capital in the form of per capita education expenditures led trade hypothesis also works in Pakistan in both periods. Afterwards; the study has found that exchange rate has significant but negative impact on trade openness in both short run and long run in the both models in Pakistan. Finally; the estimates of CUSUM and CUSUM square have exposed that there does not exist any structural instability over time in the both models of the study.
Impact of Intellectual Capital on Firms Financial Performance In Pakistan
(2017-04-05) Mumtaz, Sidra
Abstract: The motive of the study is to assure the significance of intellectual capital on firm’s financial performance in Pakistan’s non-financial sector from 2008-2014. It is a clear fact that intellectual capital plays substantial role in profitability and productivity of a business organization. Previous studies found a number of variables to measure the components of intellectual capital and firm’s profitability. However, this study includes modified value added intellectual capital (M-VAIC™) which is a restructured form of value added intellectual coefficient (VAIC™) introduced by (Pulic, 2000). In this research the progress of an organization is ascertained by different profitability ratios. Leverage, growth and firm size are taken as control variables.The companies should focus on their human, structural and relational capital because there is no company which can exist without the involvement of intellectual capital. It is a clear fact that tangible assets are important for growth and profitability of business and enhance also the productive resources of company. The results show that intellectual capital has significant role in the performance of non-financial companies in Pakistan. This study shows that intellectual capital positively affects operating income return on investment and return on assets.
Managing the gap between Actual and Target Capital Structure: An Evidence from Pakistan.
(Journal of Management and Research., 2015) Rafay, Abdul; Javed Gilani, Usman; Ijaz, Farrukh
Investment framework is one of the most significant components that impact the company’s value. Reliable funding choices for a company generally lead to a capital structure that increases the firm’s value (Abor, 2006). Early studies provide contradictory reviews about a company’s capital structure decisions. This paper investigates the partial adjustment model for a company’s target capital structure. The study also explores how companies operating in different sectors of Pakistani market adjust towards the target capital structure levels. The study also recognizes that an unanticipated share price change also have an effect on the target capital structure. The results indicate that companies do have target leverage and that their adjustment speed varies from sector to sector of the Pakistani market. A typical sector closes more than 50% of the gap between its actual and its target debt ratios within one year
The pricing of descretionary accruals - evidence from Pakistan.
(Journal of Management and Research., 2015) Khalid, Zunera; Yasser, Farah; Ajmal, Muhammad Mobeen
Even now with the cutting edge businesses and specialized management, a large number of the firms are owned by families in Pakistan. Agency disagreements and issues exist between the management and the owners as well as the minority shareholders and the block holders. To handle these feuds, accountants use discretionary accruals. These accruals help to manage earnings and smooth sharp trends to protect the interest of management and the owners. This study determines whether the investors manage the earnings through discretionary accruals or do they price these accruals when considering the stock price. This study finds significant evidence that the market prices discretionary accruals. We find that the firms with higher number of institutional ownership, high quality audit production and higher number of independent board have significantly higher impact of discretionary accruals on their stock returns as compared to other firms.
Problems and Issues in Transformation from Conventional Banking to Islamic Banking: Literature Review for the Need of a Comprehensive Framework for a Smooth Change.
(City University Research Journal., 2015) Rafay, Abdul; Sadiq, Ramla
During last few decades, conventional financial systems are being transformed to Islamic financial systems in many countries around the globe. One of the major components of Islamic financial system is Islamic Banking. As most of the economies were not ready for this change, Islamic banks and financial institutions were and are confronted by many difficulties primarily due to non-existence of a comprehensive framework. We studied these transformation problems and issues in Far Eastern countries being the first entrants in this transformation phase. Among a large number of problems some are lack of general awareness among various stakeholders, existence of different schools of thought within Islam and insufficient/ineffective legal rules and regulations. Concerted efforts are not made to develop a new framework in line with the sensibilities towards the role of religion in commercial and financial activities of society and to introduce laws compliant with core Shariah principles, prudential standard requirements for supervision, disclosure requirements for financial statements, corporate governance and transparency requirements, new product development requirement, consumer code of conduct to name a few. New entrants in Islamic Banking may take benefit of this learning curve.
The Role of Islamic Finance in Sustainable Development.
(Journal of Islamic Thought and Civilization., 2015) Sadiq, Ramla; Mushtaq, Afia
The current global inclination is to utilize non-renewable resources responsibly and create a world that future generations can thrive in. In order to achieve this aspiration countries all over the world agreed upon a set of sustainable development goals (SDGs). Sustainable development is a concept that incorporates meeting “the needs of the present without compromising the ability of future generations to meet their own needs”. This depends largely upon economic growth. Islamic finance has been highlighted in recent research regarding impact on financial sector due to its considerable growth. The purpose of this paper is to discuss the major perspectives in which Islamic Financial Institutions (IFIs) play a fundamental role in the achievement of sustainable development goals. The literature suggests five main aspects which are reviewed from the perspective of existing research.
The value added efficiency and corporate governance within Saarc
(University of Management and Technology Lahore, 2017) Shahzeb Ahmed, Wattoo
The corporate scandals of 21st century have established the need for having corporate governance mechanism in place in order to be able to protect various stakeholders’ interests. Consequently, many countries have responded to these pressures by working closely with international institutions such as World Bank, IMF and Organization for Economic Co-operation and Development by adopting codes of corporate governance. To mitigate the conflicts arising from separation of control and ownership, board of directors is known to be one of the internal corporate governance controls in place while external actors of corporate governance are various types of shareholders themselves. The main objectives of the study are to explore various ownership structures and the board practices, their changing dynamics and to examine the impact these variables on the corporate performance measured as value added efficiency of corporate resources from four of the SAARC countries namely Bangladesh, India, Pakistan and Sri Lanka. This research uses data of listed companies in chemical and pharma sector for a period beginning 2010 and ending 2015. The study, based on the prior literature, uses selective ownership structures as external actors of corporate governance and selective attributes of Board of Directors to measure the internal corporate governance practices and uses Pulic’s Value Added Intellectual Coefficient (VAICTM) model to measure value added efficiency of corporate assets. The exploratory process reveals a thin improvement in corporate governance landscape over the six-year observatory period where Pakistan and India improved significantly while the corporate governance worsened in Sri Lanka. Variation of internal corporate governance practices has been also observed as certain companies within the region were found not adopting the codes of corporate governance while some entities stepped beyond the minimum requirements of the codes. Moreover, the regression results indicate that various ownership structures significantly impact corporate performance in most of the region. On the other hand, corporate performance is not significantly affected by the selective board practices as certain coefficients were found insignificant in various regions. This process was further repeated for firms of different asset sizes revealing little evidence of the impact of various corporate governance indicators on corporate performance. These findings are important to practitioners as well as policy makers as it allows them to have an insight into the corporate governance practices within firms allowing them to make investments with care, finding deficiencies within the system and making recommendations such that an optimal corporate governance system is enacted.
Volatility Modeling for Spot and Futures of Crude Oil–Evidence from Pakistan.
(Abasyn University Journal of Social Sciences., 2015) Rafay, Abdul; Javed Gilani, Usman; Naeem, Muhammad Abu Bakar; Ijaz, Maham
In this article, we study the volatility of Spots and Futures of Crude Oil using daily data from the period 2010-2013. We examine both the Crude Oil Spots and Crude Oil Futures traded on the Pakistan Mercantile Exchange. Our main findings suggest that (1) shocks tend to persist over a long period of time for both Crude Oil Spots and Crude Oil Futures; and (2) shocks have asymmetric effect on the volatility. Hence our findings indicate that behavior of Crude Oil Spots prices and Crude Oil Future prices tends to vary over time.

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