MS Banking and Finance

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A Clustering Method for Portfolio Optimization The Case of Pakistan Stock Exchange
(UMT.Lahore, 2020) Rafia Ghulam Ali
Extantevidence shows that clustering analysis can improve portfolio selection and performance. This study aims to improve portfolio performance using K-means clustering technique in Pakistan Stock Exchange (PSX). For this purpose, using daily return for the period of January 2010 to December 2018, the study develops three stock clusters based on Firm Size, Return on Equity and Return on Assets. The findings reveal that the clustering technique out performs naïve portfolio strategies in traditional Markowitz mean-variance framework.
A Comparison of Stock Market volatility
(UMT,Lahore, 2016-04) Faizan Naqvi
Purpose: The main purpose of this research is to investigate the differences in volatility of emerging vs developed stock markets to safeguard the interest of small and foreign investors. This study examine the relationship between daily information flow and conditional volatility in developed and emerging economies and to find out whether traded volume is a good proxy for daily information flow. Design/methodology/approach: To achieve the objectives of this research standard method used to analyze the volatility, i.e., TARCH, EGARCH and ARMA model. This research used secondary data of 18 Emerging and 22 developed stock market indices. Daily closing prices and daily traded volume is used as the proxies for conditional volatility & information flow respectively. This study covers the time period from 1990 to 2015. Whilte’s general test and Breusch-Godfrey test is used for Heteroscedasticity and Auto-correlation correspondingly. TARCH and EGARCH both models are estimated under General Error Distribution. Findings: The study concludes that magnitude and direction of shocks are equally important in developed markets but in case of emerging markets magnitude of shock play vital role. Volatility persistence is quite high in both sets of markets but more high in developed stock markets. Asymmetry is uniformly present in all markets considered; leverage effect of bad news has stronger effect in developed markets. Results show positive relationship between volume and volatility also when volume is decomposed into its components, added to variance equation volatility persistence decreases. Research limitations: Risk adjusted returns offered by both emerging and developed economies would also be considered along with volatility analysis to analyze as to which markets are paying more dividends or returns accordingly to risk associated with that particular stock. Practical implications: This research is very useful from investor’s point of view as the risk analysis is done across variety of emerging and developed markets, investor could make a judgment for investment according to his risk appetite. This research also examines the relationship between volume-volatility so it would help the technical and financial analysts to better understand the volatility of different stock market indices while doing investment decisions. ii Originality/value: As far as we know there is no evidence on the volatility comparison sample time span considered to incorporate the major shifts in the economies. Volumevolatility relationship and the decomposition of volume into its components then adding into variance equation resulting in reduced GARCH effect adjoin value. Therefore, this study adds new knowledge to the literature of volatility analysis.
A Viable Takaful Model for Live Stock Industry in Pakistan
(UMT.Lahore, 2021-11-29) MUHAMMAD AMMAR ASHRAF
Pakistan is an agricultural country where most of the country’s economy is based on agriculture. Due to the huge potential in the market farmers tend to minimize their risk by taking insurance policies for their livestock and Takaful industry does not have any Shariah alternative product for this sector. The purpose of the study is to suggest new product for Takaful industry that insures the safety and prosperity of livestock. This research has qualitative approach, utilizing unstructured interview technique with eleven participants. From interviews we gathered the views and opinions of participants about the best suitable and viable Takaful model for livestock in Pakistan. To have a comprehensive understanding of these issues, interviews were conducted with Shariah experts of Takaful industry including Shariah compliance Department, Shariah Advisors and Product Development Department. This study differs from prior studies on livestock. Findings of the interviews from these experts are that among all existing Takaful models, Waqf-Wakala model is the most suitable for livestock industry in Pakistan. Regulatory bodies needs to create a workable environment that motivates positive steps towards livestock Takaful. Currently livestock industry is providing most percentage of progression in the economy of Pakistan. And whenever something is this vital for a country, it must be kept safe. Hence ensuring the livestock is very important for its safety. Through Takaful we make sure that the livestock animals that we eliminate all risk factors such as catching an illness or virus or get injured etc. insurance will cover all such risks and additionally provide good nutrition and health to these animals as well. The livestock animal will be looked after and be kept in very good conditions in order to combat all the risk factors involved and the animal is safe and healthy.
ADJUSTMENT OF SPEED TOWARD TARGET CAPITAL STRUCTURE
(UMT.Lahore, 2021-05-21) NABEEL AHSEN MALIK
In Corporate finance, we deal with companies' financial sources, their capital structure, and the companies' investment decisions. The main thing in corporate finance is Capital Structure. We adjust debt and equity to maintain expenses and benefits in the capital structure. So, a lot of companies set their capital structure for balancing debt and equity, also called the target capital structure. Companies observe that their observed capital structure varies from the target capital structure, which could be because of financial constraints or External Financing. Therefore, companies have to adjust the observed capital structure towards the target capital structure in adjusting costs. So, the purpose of this study is to explore the consequences of financial constraints on the adjustment of speed towards the target coital structure and whether these financial constraints positively or negatively affect the target capital structure in Pakistan. For this piupose. Panel data of 57 nonfinancial Firms registered in the Pakistan Stock Exchange from 2009-2019 are used. The estimations are performed by using panel regression with fixed effects. It is observed that Distance to coital structure positively affects our dependent variable the total leverage (TLEV). Similarly, Long Term Leverage (LLEV) also leaves a positive effect on Total Leverage (TLEV) while the variable Tangibility is negatively influencing our dependent variable i.e. Total Leverage (TLEV). Net Debt Tax Shield (NDTS) is not showing any impact on Total Leverage (TLEV). After that. Size of the firm is negatively affecting our dependent variable TLEV. Likewise, Profitability and Liquidity of firm are also showing negative impact on our dependent variable, i.e., the total leverage(TLEV).
An Empirical Analysis of Banking Sector in Pakistan
(UMT, Lahore, 2015-07-15) Bushra Shafiq
Purpose – The purpose of this research study is to determine the impact of service quality being provided by the Islamic and Conventional banks on customer‟s judgments towards their satisfaction level on different parameters of Islamic banks in the region of Lahore, Pakistan. Design/Methodology/Approach – A preliminary questionnaire has been employed to determine the factors of customer satisfaction and SQL in both banking streams in Pakistan. A questionnaire was formulated to obtained data from the 300 respondents using a convenience sampling technique. T-tests, correlation , ANOVA and regression analysis used to test the extent of relationship among SQL and CS for the both banking sectors of Pakistan. Findings – The consequences depicts that there is a strong positive association among SQL and CS in the banking segment. Further results illustrates that the extent of affiliation among SQL and CS is larger in Islamic banks as contrasted to conventional banks. Originality/Value/Implications – In Pakistan, there are fewer studies that raised the issue of SQL and CS in Islamic and Conventional banks within in a single study. Also, as Islamic banking is a new phenomena which is getting increasing market share in terms of market size and deposits, so this comparison is also of great importance. This study has a number of inferences for bankers, policy makers and academicians.
ANALYZING THE FINANCIAL SOUNDNESS OF THE COMMERCIAL BANKS IN PAKISTAN
(UMT.Lahore, 2020) Faiza Ashraf
The performance and assessment of soundness in the banking sector is vital for the capital growth and betterment of any economy, hence, it cannot be negated that how critical it is in the economic condition at present. Keeping this in mind, this research is focused on investigating the effect of various parameters on the performance of commercial banks of Pakistan using the CAMEL framework over the period 2006 to 2018. A sample of 20 banks that operate commercially is used for conducting the study. Bank performance (ROA) is taken as dependent variable whereas CAMEL rating model parameters are used as independent variables. After studying and analyzing the financial statements from selected banks, the ratios are calculated. It is found that earnings quality stood out as the highly significant factor that impacts the performance of banks in Pakistan. Assets quality and management efficiencies are impacting the performance of banks significantly. However, capital adequacy ratio and liquidity are found to be the insignificant factor of the CAMEL model that has an impact on the performance of banks in Pakistan. Thus, the banks must ensure good loan quality because it has a negative influence on performance and that the management of Pakistani banks must be well resourced to be efficient.
APPLICATION OF THEORY OF PLANNED BEHAVIOR ON MUSLIMS INTENTIONS
(UMT.Lahore, 2022-03-07) MUHAMMAD MUSA
Purpose: The purpose of this study was to use a theoretical model based on the theory of planned behavior to investigate the impact of attitude, subjective norms, perceived behavioral control, awareness and knowledge, religiosity, and service quality on the Muslim minority intention to use Islamic banking in Spain. Design / Methodology: An adopted questionnaire with 36 items was used to collect data from 300 Muslim respondents living in Catalonia, Spain, who knows of the existence and knowledge of Islamic banking. Factor analysis, reliability analysis, and regression analysis were applied to analyze the data using Smart PLS software. Findings: The study found that people‘s attitudes, subjective norms, perceived behavioral control, service quality, and awareness and knowledge were the significant influencers affecting the intention to use Islamic banking. Religiosity has no relevance in developing preferences about using Islamic banking in Spain. Research Limitations: The sample has 300 participants living in Catalonia, although results should apply to all Muslims in Spain. Also, this study does not consider behavioral intention as a moderator. Research Implications: The research is original, and its implications will help target Muslim minority customers with customized products. The study shows the potential for Islamic banks in the Span and the possibility of raising awareness about Islamic banking.
Bridging nexus between the Financial Returns of the Film Industry and its determinants A case of Pakistan Film Industry
(UMT,Lahore, 2017-12) Waqar Hassan Randhawa
The purpose of this study is to discern the determinants of the returns of movies in its distinctive genre in context of cinematic factor and financial impact factors. We further tested the adequacy of the current return being a success story in comparison to past. A total of 900 movies sample has been chosen and stratified into equivalent number relating to the old era (1980-2006) and new era (2007-2016). The data demographically relates to the major cities of Pakistan; Lahore, Karachi, Islamabad, Rawalpindi, Peshawar & Quetta. The data is further stratified into Returns (Based upon Box office collection and Investment) and with respect to their perceived determinants, cast, direction, story & Music. We have also tested perceived Financial Determinants (Cast remuneration, variable production cost and promotional expenses). For determining the quantum of returns independent sample T statistics was applied. In order to test the significance of perceived determinants of returns of the movies OLS regression was applied. Our study indicates a surge in returns. Furthermore it reveals that cast and direction are the most significant predictors for the returns, whereas music and story has only shown partial predictability. We have established empirically that for Pakistan film industry the financial returns heavily bank on the financial determinants in which more prominently the cast remuneration and the direct variable cost have major to contribute.
Capital structure, Free cash flow, Market structure and Firm performance
(UMT,Lahore, 2016) Sana Nasir
The present study collectively inspected the inter-connection of capital structure, free cash flow, market structure and firm performance. Previous studies has inspected every factor association separately, nonetheless these 4 variables jointly linked also the complex endogenous association. Therefore, there is a need to investigate collectively of these four variables for better comprehend the association among them. This study found the results that the total debt leverage is positively significant on firm performance which means that the high debt level is considered a positive sign in the market and those manufacturing companies are considered proficient of bearing higher debt. While firm performance is negative significant on leverage. HHI is positively significant on firm performance. Free cash flow is negatively significant on firm performance. Leverage is significant as well as positive on HHI. HHI is positive as well as significant on firm performance. The industry-wise results are also explained in this study. The industry-wise graphical presentation also represented to examine the industry’s concentration in the market.
CASH HOLDINGS AND THE VALUE OF INVESTORS
(UMT, Lahore, 2018-12) Zohaib Naeem Babar
The primary purpose of this study is to find the relation between the cash holding and the value of investors. Fixed effect model is used to achieve the objectives of this research study. The study investigated the relationship between cash holdings and value of investors by employing three portfolios which are all firms, constrained firms, and firms with better investment opportunities. KSE-100 listed firm’s data is taken and fix effect model in regression is applied. The study contributed that there is positive and strong relation between the cash holding and the value of investors in all firms and constrained firms. But in the firms which have better investment opportunity has no relation between the cash and value. Earnings show the positive and significant relation with the value in all the portfolios. Other variables are used as control variables.
COMPARATIVE EFFICIENCY OF SUKUK, CONVENTIONAL AND GREEN BONDS PRE AND DURING COVID-19
(UMT.Lahore, 2022)
This study uses asymmetric multifractal analysis to compare the efficiency of the sukuk, conventional, and green bond markets before and during the Covid-19 pandemic. Particularly, the asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) approach examines the multifractal scaling behavior independently during upward and downward trends in bond markets. Our experimental findings conclusively show that the markets for sukuk, conventional, and green bonds are multifractal. Consequently, during the COVID-19 epidemic, inefficiencies in all bond markets considerably increased. The findings also shows that the downward multifractality is more grounded than upward multifractality, which means markets are more efficient when prices start to decline, notably in sukuk bonds. The conventional bond markets will typically be more effective than the sukuk and green bond markets for general business sector patterns for the majority of the study time frame. The traditional bond market's larger size and longer maturity compared to the sukuk and green bond markets can be directly linked to this outcome. It is found that during the COVID-19 pandemic, inefficiencies dramatically increased in each of the three security markets, although the sukuk security market appears to have demonstrated a greater level of efficiency. The study's conclusions have a range of implications for investors, portfolio managers, and policymakers.
CONVERSION OF THE BANKING SECTOR OF PAKISTAN INTO FULL-FLEDGE ISLAMIC BANKING
(UMT.Lahore, 2023-04-04) MUHAMMAD WAQAS JAMIL
Purpose –This study aims to gather the opinions of all relevant parties in order to determine not only the reasons why Pakistan's financial system has not yet been converted to an entirely Islamic one but also how and when such a conversion can be made possible. The study also offers recommendations and proposals for how to resolve those issues and problems in light of the perspectives of experts. Following the suggestions of this study, one can estimate the time needed for Pakistan's banking system to fully convert to Islam. Design / Methodology / Approach –For this study, qualitative research methodology was employed. Semi-structured "Open-Ended Questions" are created for the data collecting. Interviews are done with professionals and specialists from different Pakistani financial system stakeholders. The questions were answered by 23 of the 30 respondents. The Content Analysis Technique is used to manage and analyse the data. Practical / Research Implications –For all the financial system's stakeholders, decision makers, and scholars, this study will unquestionably be useful. It will assist them in recognizing the actual difficulties of the conversion process and how to overcome them, in developing new policies for Islamic banking and finance, and in putting such policies into practice. Finding –According to this study there are numerous issues and barriers that must be overcome before Pakistan's banking system can be converted to an Islamic one. The most significant obstacles are the coordinated plots and complicity of governments, constitutional and regulatory bodies, judiciary, bureaucracy, elites, and financial monopolies; a lack of an Islamic legal framework; a lack of technical expertise; a lack of 2 knowledge and training among bankers and Shariah advisors; and a lack of communication. Other operational and institutional issues also call for more focus. Without addressing these issues, adopting true Islamic banking in Pakistan is all but impossible, and the conversion process is little more than a pipe dream or urban legend. Originality / Value – Although there are several researches about the challenges of IBs in Pakistan by different aspects but no one has discussed comprehensively about the conversion process and the time required for it in the light of opinion of various stakeholders of IF industry of Pakistan.
Corporate Governance and Earnings Management
(UMT.Lahore, 2018-03) Mohsin Mumtaz
The research employs fixed effects methodology to examine the impact of corporate governance on earnings management in non-financial firms of KSE 100 index within Pakistan from the period 2010 to 2016. Corporate governance mechanisms examined comprise board size, board meetings, audit committee independence, audit committee meetings, big 4 audit firms and managerial ownership. While earnings management is measured through discretionary accruals measured in accordance with the Modified Jones Model (1995). Results of the study indicate that larger board encourages earnings management through increased board diligence appears to have a controlling impact on profits manipulation by management. Further, we find that lower percentage of insider shareholding encourages earnings manipulation. This could stem from the overriding influence of larger block holders and institutional shareholders on the smaller shareholders for the achievement of short-term profits by firm leading to earnings management. While more independent members on audit committees encourage earnings manipulation which is in line with the findings related to board size. We also find that more the board members meet, would reduce the earnings management practices. It suggests that board and audit committee members may encourage earnings manipulation from the need to protect their credibility and reputations in the markets by showing robust earnings and firm performance. This is the first study that provides glimpse of the impacts of corporate governance changes in response to the 2012 SECP Code of Corporate Governance, and we contend based our findings that there is a need for tougher legislation, and more elaborate measures with which to assess corporate governance performance within firms.
Corporate governance and idiosyncratic risk
(2020) Khurram Shahzad
Corporate Governance Mechanism to Improve Disclosure Quality of the Firms
(UMT, Lahore, 2018-03) Naveed Ul Haq
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. The empirical investigations report twelve closely related and important corporate governance mechanisms that are related to the increased 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.
Corporate Social Responsibility and its Impact on Distance to Default and Credit Ratings – An empirical study on Banking Sector of Pakistan
(UMT.Lahore, 2021-03) Rana Muhammad Usman
The study analyzed the impact of Corporate Social Responsibility on the Default Risk and Credit Rating. By using the balanced panel data of 31 banks working in Pakistan, without the difference of their scale, for the duration of 2008 to 2017. Econometric models were analyzed by using the STATA (ver.15) software, by testing Pooled OLS and GMM models. Price to book value, Market capitalization and E volatility are kept control variable. DD is tested through Naïve model formula and Credit ratings are given a scale of 1 to 9 for lowest to highest i..e CCC to AAA. The results of the study revealed overall corporate social responsibility has a significant impact on credit rating as well as DD of banks in Pakistan.
Credit Ratings are influenced by Corporate Governance Multiple Factors
(UMT.Lahore, 2019-02) SHAHID MUSHTAQ
Study aims to examine Influence of Corporate Governance multiple factors on the Credit Ratings of banking sectors across two emerging economies that is Pakistani and Sri Lanka. Authenticity of results are proven by applying multiple models that include ordinary least square regression, generalized least square regression and random effect regression. Models are applied on panel data that is extracted from financial statements of banks for six years horizon that is from FY2011 to FY 2016. Study perceives that board size and board independence having negatively significant and board meetings having positively significant influence on credit ratings for Sri Lankan banking sector. Whereas, audit committees having positively significant influenced on credit ratings for Pakistani banking sector. Further, study also perceives earnings per year having positively significant influence on credit ratings for economies, return on assets having positively and return on equity having negatively significant influence on Sri Lankan banking sector. Capital adequacy ratio and nonperforming loans having no influence on credit ratings of both economics banking sectors.
DEBT TAKAFUL AS A RISK MITIGATION TOOL (A FEASIBLE TAKAFUL MODEL OF TRADING DEBTS FOR BUSINESS INDUSTRIES IN PAKISTAN)
(UMT.Lahore, 2021-08-21) AMER ABBAS
Islamic finance is a need of time. People prefer Shariah-compliant solutions for their needs, such as Islamic banking, so the government must improve its position in Islamic finance so that people can find Shariah-compliant solutions to their problems. Takaful is a type of Islamic insurance. Takaful is an Islamic way of doing insurance. After many Fatwas, that were issued by Shariah Scholars and Fiqh academies in its favor it proved its viability. Many Takaful and Re-Takaful firms, and Takaful windows under conventional insurance, operate around the world at the moment. The significant growth in Takaful business around the world can be seen in the improved financial performance of selected Takaful companies. Takaful is a mechanism which is acceptable for Shariah. Some companies, such as "EULER HERMES" and "ZURICH," have recently begun providing credit insurance in various countries. They are not offering Takaful model for Trading Debts. Takaful is an alternate solution of conventional insurance. Insurance companies are providing insurance for this sector, but peoples prefer Takaful policies instead of insurance. That’s why a Takaful model for Business industries is needed so that an organization can cover its losses using a mechanism that is aligned with Shariah rulings. This research work will be regarded as a starting point for further enhancement of research about Debt Takaful in Pakistan to complete the cycle of Islamic finance. It is a step towards creating awareness among general public of the need and importance of Debt Takaful in present day environment as well as a way to break the cycle of poverty and wide income differences. This research provides alternate solution of credit insurance that is used by various companies in European countries. This research discusses different views of Islamic scholar on conventional insurance and Takaful models being practiced by different Takaful companies across the world. This research also discusses some Shariah related issues faced by Takaful companies practicing various Takaful models in different countries. In the light of recommendations of respondents, this study concludes by proffering suggestions and proposes the best debt Takaful model.
Determinants of Capital Adequacy Ratio in Banking Sector of Pakistan
(UMT,Lahore, 2014-04-28) Syed Razi Zafar
Purpose - This study strives to explore the relationship of capital adequacy ratio with the determinants of capital adequacy ratio of the banking sector of Pakistan to found out that which of the determinants has the greater impact on capital adequacy ratio. Design/methodology/approach – The panel data of 26 banks for the years 2008-12 was taken regarding various banking and financial variables i.e. capital adequacy ratio, ROE, liquidity, bank efficiency, size of bank, bank‟s capital to asset ratio, Tier-1 capital ratio, financing to deposit ratio and share of deposits in non-equity liabilities. An econometric data analysis technique was applied for the results. Findings – The study shows that the shares of deposits in non-equities liabilities and capital to asset ratio are the two main independent variables that have the significant impact on the capital adequacy ratios of the banking sector of Pakistan. Whereas return on equity, liquidity, bank efficiency, Tier-1 capital ratio and financing to deposit ratio have no significant impact on capital adequacy ratio of the banking sector of Pakistan. Managerial Implications - The study will assist policy makers and decision making authorities of domestic and international banks to have a better look at efficient ways of taking capital structure decisions, analyzing cost of capital and maintaining capital adequacy ratios up to optimum levels. Originality/Value – This study strived to find out the major determinants of capital adequacy ratio in banking sector of Pakistan by having two new variables in the study that have never been used before. Also the rationales that provide, immunity to banks in Pakistan, have been discussed for the first time in detail.
Determinants of Dividend Payout Ratio
(UMT,Lahore, 2016) Muhammad Waqar Akram
The Cement sector has been most attractive sector in both Pakistan and India for investment prospects. The Governments of both countries are investing in different types of infrastructure facilities which will boost cement sector ultimately. The objective of this study is to find the factors whose decide the dividend policy of cement sector of Karachi Stock Exchange (KSE) & Bombay Stock Exchange (BSE). The dividend payout ratio (Cash Dividend/Net Profit) has been used as dependent variable and leverage (Debt/Equity), liquidity (Current ratio), profitability (Net Profit), investment opportunity (retained earnings/total assets) as independent variables and size (total assets), growth (Sales growth) and tangibility (Fixed assets/total assets) as control variables. The data has been extracted from annual reports of 40 companies (17-KSE and 23-BSE) from 2009 to 2015. The regression analysis with fixed and random effect used. The results show that profitability, liquidity have positive and significant effect on dividend payout ratio and Leverage, investment opportunity have negative impact on dividend payout ratio. Size, growth and tangibility also have direct relation with dividend payout ratios. The tangibility has significant effect in KSE only whereas in BSE, it is not effecting significantly. The BSE companies are paying dividend more consistently than KSE Companies.

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