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Item Factors Determining the Selection of Capital Budgeting Techniques(UMT, Lahore, 2014-09-24) Farrukh IjazPurpose: The main purpose of this research study is to determine the factors that play an important role in the selection of a particular capital budgeting techniques. The study determines the factors that an investor considers significant in the selection of capital budgeting techniques. Methodology/Design/Approach: A primary data based study of 92 firms has been conducted to find the determinants of capital budgeting techniques selection while considering financial and non financial factors. The financial factors include company size, growth rate and capital expenditure, whereas non financial factors include project life, industry, management demographics, competition in the industry, environmental uncertainty and risk. Findings: The study concludes that firm’s decision maker’s considers both financial and non financial factors (except leverage level and company age) while selecting capital budgeting technique. Small firms usually rely on a one capital budgeting technique and therefore, mostly don’t consider the non-financial factors like company age, competition and demographics. Research Limitations: The study takes the data of the listed and non-listed companies that are operating and having their offices in the region of Lahore. Managerial Implications: The study assist investor’s and decision making authorities of domestic and international firms to have a better look of taking capital budgeting decisions. This research also enables a broad and rich overview of capital budgeting techniques used for investment projects within the Pakistan. Originality/Value: Most of the operational issues and factors of capital budgeting methods leading to its long term sustainability and selection are brought under discussion. First comprehensive study has been conducted on factors determines the selection of capital budgeting techniques within the Pakistan.Item Investigating the Short run Under-Pricing Phenomena & Long run Underperformance of IPOs (Initial Public Offering)(UMT, Lahore, 2014-07) Ehsan Ahmad QureshiThis thesis investigates whether the two main anomalies (Short Term under-pricing & long tern under-performance) of IPO (Initial Public Offering) exist or not in the context of Pakistan. This study also investigates the main determinants of IPO underpricing and IPO Underperformance for firms listed in Karachi Stock Exchange from 2000 to 2012. Data collected from prospectus & offer for sale documents in order to see the impact of Pre IPO Characteristics on both anomalies of IPO. The study reveals IPO market in Pakistan reward to investors with some positive returns in short run just like other countries. We concluded that IPO underpricing does exist in emerging market of Pakistan. The degree of Underpricing in the sample (71 IPOs) is 31.17% (short term abnormal returns). The study also reveals that the performance of studied IPOs in long run w.r.t Karachi Stock Exchange is poor for investors; i.e average abnormal holding returns for period of one year are negative. The level of Underperformance is 15.98% in emerging market of Pakistan. Based on regression, we conclude that the significant determinants used to explain the level of underpricing are Underwriter Reputation, Firm Age and Pre IPO Profitability. The impact of Firm Size and Dilution of ownership on Longrun underperformance is also found significant. We also document that determinants Firm Size, Underwriter Reputation and Dilution of Ownership are negatively related with the Level of Underpricing, but offer Size, Firm Age and Pre IPO Profitability are positively related with Underpricing. The determinants Firm Size, Pre IPO Profitability and Dilution of Ownership are negatively related with the Long run Underperformance of IPO. It is also found that Firm Age and Underwriter Reputation and offer size are positively related with the level of Underperformance of IPO. Our results strongly support the Signaling theory and Ex-ante Uncertainty Model of Asymmetric Information TheoryItem Impact of Leverage on Cash Holdings(UMT.Lahore, 2014) Shama UroojThe study attempts to investigate the cash holding behavior of Pakistani non-financial firms using the data of 100 companies for the period 2009-2014.The study mainly focuses to investigate the effect of leverage on cash holdings. This paper also investigates the behavior of corporate governance variables in the context of cash holdings. The study observes leverage -cash holding relationship of non–financial firms as non – linear. Descriptive statistics show that Pakistani firms hold an average of approximately 9.9% cash. Overall results indicate leverage- cash holding relationship as a negative, one at low level but as leverage increases cash holdings also increase which shows that firm’s decisions regarding borrowing debt have nonlinear impact on firm’s cash holding choices. At high level of leverage, positive connection is observed between cash holdings and leverage indicating this as a reflection of precautionary effect. The results of the study support the previous literature findings regarding their nonlinear relation. The study also shows that there are firm specific as well as corporate governance variables which affect the cash holding decisions of the firms. As a result, while determining the cash holding policy of the firm, both the firm specific and the corporate governance variables play an important and significant role. Investment opportunity (Tobin Q) and institutional ownership are the most prominent firm specific factor and corporate governance variable that have more influence on firm cash holding policies in Pakistan.Item Impact of Working Capital on Corporate Performance in Seasonal And Non Seasonal Industries(UMT.Lahore, 2014) Khalid MunirThe primary purpose of every commercial activity is profit maximization and firms face internal and external challenges/limitations in achieving this objective. One such limitation in profitability is working capital. This study investigated its impact on profit in seasonal and non seasonal industries and demonstrated significant results. The relationship proved to be positive for seasonal and negative for non seasonal industries and in case of certain industries the relationship was not found significant. The results are important and significant as most of the literature leads us to a negative relationship between working capital and profitability. Study further investigated relationship of various components (receivables, payables and inventories) of working capital with working capital itself. The results indicated that components of working capital displayed a different behavior across industries. In view of positive, negative and some time non significant relationship between working capital and profitability, it becomes a preliminary question that must be answered first of all before making any investment in working capital (to exactly forecast its impact on profitability), what is the basic relationship and its direction between working capital and profitability for any specific industry. Secondly, it needs to be understood that which component (receivables, payables and inventories) of working capital needs to be given priority for investment for yielding good profitability as different component have different relation with working capital across industries. Every industry search for optimal amount which needs to be invested in the working capital that can ensure maximization of profit, which is the foremost one single cause for which all business operates.Item Investigating the Leverage Composition of MNCs and DCs of Pakistan through their Determinants(UMT.Lahore, 2014-04) Farah YasserPurpose – This study seeks to investigate the leverage composition of MNCs and DCs in Pakistan through their determinants Design/methodology/approach – Fixed effect regression is used to show the relationship of determinants of capital structure on leverage for MNCs and DCs listed on Karachi Stock Exchange (KSE) for the period of 2006 to 2011. Findings – The results suggest that agency cost, non debt tax shield and business risk are not significant determinants of capital structure for all types of samples i.e. all firms, DCs and MNCs. Bankruptcy cost is a significant determinant of capital structure for MNCs and otherwise in cases of all firms and DCs. On the other hand, size, growth, free cash flows and collateral value of assets are significant determinants for all firms and DCs and not for MNCs. Furthermore, age and foreign exchange risk are significant determinants for all firms, DCs and MNCs. Originality/Value – This is the first study to investigate the leverage composition of MNCs and DCs of Pakistan and results suggest MNCs hold more debt in their capital structure than DCs.Item Determinants of Capital Adequacy Ratio in Banking Sector of Pakistan(UMT,Lahore, 2014-04-28) Syed Razi ZafarPurpose - 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.Item Islamic House Financing in Pakistan(UMT.Lahore, 2014-04-30) Muhammad Mansoor JavedThis study analyzes the demand for house financing offered by Islamic banks by exploring the nature of demand as well as highlighting its major determinant. The paper also strives to find out the level of knowledge of people regarding Islamic financing, factors encourage them to buy their own house, their perception of Islamic house financing and finally those features which influence customers’ decisions relating to the selection of finance provider. The population of the study is residents of Lahore who intend to buy their own house within next three years. A survey has been conducted using convenient sampling technique taking a sample size of 300 respondents. The response rate of survey is 81%. The study found that nature of demand for house financing offered by Islamic banks is conventional. Later, logistic regression has been applied to find out the affect of knowledge, quality of service and sincerity with religion on such demand. The results indicate that religious factor and knowledge affect the demand for Islamic house financing negatively whereas quality of service affect such demand positively. However, only the affect of quality of service on demand is statistically significant. On the other hand, study found that people have general knowledge of Islamic financing but they do not have specific knowledge of Islamic house financing. Further, male respondents have higher knowledge than the knowledge of female respondents. Moreover, people with higher qualification have higher knowledge. Income rise is the most important factor which encourages people to buy their own house. It is also found that people perceive Islamic house financing similar to conventional house financing. Finally, the survey also highlight that the cost of service is the most important criterion used by the potential clients to select their finance provider.Item The Impact of Leverage on Financial Performance of the Firm – a Case of Family Owned Businesses in Pakistan(UMT,Lahore, 2014-07) Muhammad GulzarThe vital aim of this study is to determine that how leverage impacts on the financial performance of the firm under the context of family owned firms in Pakistan. At the same this attempt will be useful for the financial manager of family owned firms to establish a pattern that how much percentage change in the level of debt will affect the performance of the family owned business. For the purpose of study a sample of 61 family owned firms relating to various economic sectors of Pakistan has been extracted which are currently listed on Karachi Stock Exchange. To find out which companies are family owned a criteria has been established using various research articles and family business journals. Financial Performance has been measured through five different dimensions such as Return on Asset (ROA), Return on Equity (ROE), Earning per Share (EPS), Market book Value ratio (MBVR) and Tobinsq (TQ). Leverage, has been proxies as Sort term debt as percentage total assets, long term debt in relation total assets and total debt to total assets. Results, shows that leverage in the form of short, long or total debt does affect the financial performance of the firm in both ways. Moreover, firm level characteristics such as size and NDTS also showing significant results. Thus, financial managers, owners may consider leverage as a vital element of the capital structure as it may enable them to intriguer the performance of the firm.