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Purpose This paper aims to empirically assess the contribution of Islamic banks toward the financial stability of Pakistan. For this, the authors investigate the relative financial strength of Islamic banks and their contribution toward the financial stability. They also examine the relationship between the competitive conduct of banks and banking system stability. Design/methodology/approach The authors use quarterly data of ten conventional banks, four full-fledged Islamic banks and six standalone Islamic branches of conventional banks of Pakistan for the period 2006-2012. The z-score has been computed and used as the measure of stability of banks and the random effects estimator applied to quantify the impact of bank-specific variables and macroeconomic indicators on the financial stability. The empirical framework used in the paper enables the authors us to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks. To check the robustness of the results, the authors have estimated several models with different specifications. Findings The regression results indicate that income diversity, profitability ratio, loan to asset ratio, asset size and the market concentration ratio of banks have significant effects on the stability of banks. Comparing Islamic and conventional banks, notable differential effects of the empirical determinants of financial stability for Islamic and conventional banks have been observed. The results suggest that Islamic banks have performed better as compared to conventional banks and contributed more effectively in the stability of financial sector. Overall, the results depict that the contribution of Islamic banks toward the financial stability has been reasonable and prospective. Practical implications The empirical results of the paper are very useful not only for banks’ managements but also for the investors, bank customers and policymakers. Specifically, the findings help in enhancing our understanding as to how the bank-specific variables and macroeconomic indicators are related to the financial stability of the banking system. The results also help understand the role of both Islamic and conventional banks in the financial stability. Further, the results suggest that the financial soundness can be enhanced by creating healthy competition in the banking industry. The results about macroeconomic indicators imply that protective measures are required to intensify (mitigate) the positive (negative) effect of gross domestic product (inflation) on banks’ financial stability. Originality/value This paper provides an overall comparative analysis of financial stability of both Islamic and conventional banks of Pakistan. First, the paper computes the z-score for each bank included in the sample, and then, it performs the regression analysis to study how bank-specific variables and macroeconomic factors are related to the financial stability of banks. Unlike the previous studies, our empirical framework enables the authors to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks.

This article empirically investigates the effects of macroeconomic and firm-specific risk on firms' leverage. The analysis is carried out for a large panel of public and nonpublic UK manufacturing firms over the period 1999-2008. Our investigation provides evidence that UK manufacturing firms use less short-term debt during periods of high risk. However, the leverage of nonpublic manufacturing firms is more sensitive to firm-specific risk in comparison to their public counterparts while macroeconomic risk affects both types of firms similarly. Our investigation also shows that firms with high liquid assets reduce their leverage more (less) during periods of heightened firmspecific (macroeconomic) risk. (JEL C23, G32)

We show that risk plays an important role in estimating the adjustment of the firm's capital structure. We find that the adjustment process is asymmetric and depends on the type of risk, its magnitude, the firm's current leverage, and its financial status. We also show that firms with financial surpluses and above-target leverage adjust their leverage more rapidly when firm-specific risk is low and when macroeconomic risk is high. Firms with financial deficits and below-target leverage adjust their capital structure more quickly when both types of risk are low. Our investigation suggests that models without risk factors yield biased results.

Purpose The purpose of this paper is to empirically examine the impact of financial development on poverty reduction in developing countries. The paper also investigates whether financial development affects poverty via institutional quality and GDP growth. Design/methodology/approach To take into account the dynamics nature of panel data and country-specific effects, the authors use a two-step system GMM estimator. The authors also employ a large array of measures of financial development in order to check the robustness of the results. The analysis is carried out for a sample of developing countries using an unbalanced panel data set covering the period 1985-2008. Findings The authors find that financial development plays a significant role in reducing absolute poverty. However, the authors do not find any pro-poor impact of financial development when poverty is measured in relative terms. The authors show that the impact of financial development on poverty alleviation is statistically significant when liquid liabilities and credit granted to the private sector are used as a proxy of financial development. The results on the indirect effect of financial development indicate that financial sector development has larger effects on poverty reduction when institutional arrangements are sound or/and when economic growth is high. Practical implications The findings suggest that the inference for a pro-poor effect of financial development depends primarily on the measure of poverty and the choice of the proxy for financial development. Banking sector reforms may be an effective instrument to tackle absolute levels poverty. However, the policy makers should not rely only on financial reforms, regardless of whether they are based on banks or stock markets, to narrow the gap between the poorest quintile of the population and the richer quintiles. Rather, they should also utilize fiscal policies, such as progressive taxation and public-expenditure projects, to redistribute resources. Originality/value The paper differs from the previous studies in several ways. First, it studies the financial development-poverty nexus using three alternative indices of poverty. Second, this study focusses on a sample of developing countries only. As the structure and development level of the financial sector in poor and rich countries could differ significantly, focussing on developing countries helps mitigate the problem of heterogeneity arising from using a pooled sample of rich and poor countries. Third, robust estimation methods are applied that take into account the dynamic nature of empirical models and country-specific effects.

The three-dimensional structures of the 2-, 3-, 4- and 6-monosulphates of methyl alpha-D-galactopyranoside have been determined by X-ray crystallography; the first two as the sodium salt, the third as both the sodium and potassium salts, and the fourth as a potassium salt. These represent the principal sulphated monomers of the carrageenan polysaccharides. The results extend our knowledge of the stereochemical features, such as ring conformation, sulphate geometry, hydrogen bonding and cation co-ordination, which characterize sulphated monosaccharides. The stereochemical data have been used to derive a mean geometry of the O-sulphate group and a set of force constants for use in molecular mechanics calculations on sulphated monosaccharides. These may be used in an extrapolation of the populations of stable conformers of related oligo- and polysaccharides.

PurposeThe purpose of this paper is to empirically examine the extent at which idiosyncratic and financial market uncertainty affect the UK private manufacturing firms' investment decisions.Design/methodology/approachA firm‐level panel data covering the period from 1999 to 2008 drawn from the Financial Analysis Made Easy database was analyzed using the system‐generalized method of moments (GMM) technique to purge time‐invariant unobserved firm‐specific effects and to mitigate the potential endogeneity issues.FindingsThe results from the two‐step robust system‐GMM estimation indicate that firms significantly reduce their capital investment expenditures when uncertainty (measured by either form) increases. The findings also reveal that private firms' investment is more sensitive to idiosyncratic uncertainty than to financial market uncertainty. The results related to firm characteristics suggest that the firm‐specific variables such as debt‐to‐assets ratio, growth of sales and cash flow‐to‐assets ratio are also important in the determination of private firms' investment. The sensitivity analysis confirms that the findings are robust to an alternative method of estimation as well as to an alternative measure of idiosyncratic uncertainty.Practical implicationsThe findings of the paper are useful for firms' investment decisions and authorities in designing effective fiscal and monetary policies.Originality/valueThe main value of this study is to investigate the effects of both idiosyncratic and financial market uncertainty on the investment decisions of private limited manufacturing firms.

Purpose The purpose of this paper is twofold. First, based on the value optimization problem of the firm, the authors proposed a theoretical model for firms’ investment decisions, which incorporates the effects of both idiosyncratic (firm specific) and macroeconomic uncertainty/risk. Second, the authors empirically estimate the proposed model for Pakistan. Design/methodology/approach The authors utilize an unbalanced firm-level panel data covering the period 1988-2013. To generate time-variant firm-specific uncertainty, the authors estimate the autoregressive model on firm sales for each firm included in the sample over the examined period. Firm-specific risk is also measured based on the square of the residuals of firms’ sales. Two measures of macroeconomic uncertainty are computed using the conditional variance obtained by estimating the ARCH model for consumer price index and industrial production index. Several alternative measures of both types of uncertainties are used to ensure the robustness of uncertainty effects. To mitigate the problem of endogeneity, the robust two-step system-generalized method of moments estimator is used to estimate the empirical model. Findings The results indicate that firms are likely to cut down their level of investment spending when either type of uncertainty increases. The results also reveal that the sensitivity of firms’ investment decisions to macroeconomic (aggregate) uncertainty is higher as compared to the firm-specific uncertainty. The authors show that these findings are robust to different uncertainty measures used in the analysis. The results related to firm characteristics suggest that the firm-specific variables namely the debt to assets ratio, the costs of debt to assets ratio, and the sales to assets ratio are also equally important in the determination of investment decisions of corporate manufacturing firms. Practical implications The empirical findings of the paper are useful for firm managers, investors, and government authority. Specifically, the results help firm managers and investors to understand how firm-specific and macroeconomic uncertainty affects firms’ investment decisions. The finding that firms cut their investment spending in times of macroeconomic instability implies that declines in firms’ investment spending during the periods of macroeconomic turmoil may delay the process of recovery. Therefore, the policy makers should design such policies that encourage firms to invest more in economic crisis periods, which, in turn, would enhance the growth of the economy and help to overcome the problem of downturn/recession. Originality/value The authors first propose a theoretical model for firms’ investment decisions based on the value optimization problem of the firm by incorporating the role of both firm-specific and macroeconomic uncertainty. Next, unlike most of previous studies, they estimate the proposed model for non-financial firms operating in Pakistan. The authors predict that a higher exposure to both idiosyncratic and macroeconomic uncertainties leads to lower investment in Pakistani manufacturing firms. Further, the authors hypothesize that both types of uncertainties have differential effects on firms’ investment decisions.