Purpose – The purpose of this paper is to examine the investment behavior of Pakistani stock market participants, specifically with respect to their tendency to exhibit herd behavior. Design/methodology/approach – The study employed two different methodologies suggested by Christie and Huang (1995) and Chang et al. (2000) to test herd formation. Results are based on daily and monthly stock of KSE-100 index for the period 2002-2007. Findings – Results based on daily and monthly stock data from Karachi Stock Exchange indicate the non-existence of herd behavior for the period 2002-2007 and find no support for the rational asset pricing model and investor behavior found inefficient. This study denied proved evidence of herding due to market return asymmetry, high and low trading volume states and asymmetric market volatility. Macroeconomic fundamentals have insignificant role in decision-making process of investor therefore has no impact on herding behavior. However, during liquidity crisis of March 2005, Pakistani stock market exhibit herding behavior due to asymmetry of information among investors, presence of speculator and questionable badla financing-local leverage financing mechanism. Research limitations/implications – In future, this study can be improved by employing stock returns portfolios based on market capitalization or sector wise portfolio returns from KSE-100. Furthermore by identifying those factors that cause market to be overall inefficient and define the pattern of the investor trading activities. Practical implications – For an accurate valuation of assets investors should incorporate the herding factor. Social implications – As the assets are mispriced, investor behavior is uncertain and markets are inefficient, foreign investors should invest with caution, as large numbers of securities are needed to achieve the same level of diversification than in an otherwise normal market. Originality/value – In Karachi Stock Exchange, it is first attempt to uncover the herding behavior. This paper contribute to the body of knowledge by investigating the herding behavior in the emerging markets since most of the previous study concentrate more on the developed markets. Furthermore, the study also analyzed the herding behavior in different economic condition and includes economic variables and examines asymmetric effect. This study presents an integrated model to test herding behavior in Pakistani equity market. Consideration of said behavioral effect in the decision-making process of investor will make the decisions more rational and optimal.

This study aimed to investigate the association between corporate governance characteristics, shariah governance characteristics, and the credit rating of Asian Islamic banks. To do so, we collected data from 22 banks during the 2006–2018 period. In total, we observed 286 data points. Credit rating was measured through an adaption of the credit rating scale that measured the long term credit of Islamic banks on an ordinal scale. From these data, 19 scores (Aaa) were considered high credit ratings and 1 score (C) was considered a low credit rating. Descriptive statistics, correlations, and the ordered logit regression model were applied in a panel setting. We found that the board interlock, board independence, CEO duality, and board foreign directorship negatively affected credit ratings. We also found that the board size, board accounting, finance knowledge, presence of women on the board, shariah board size, presence of supervisory shariah board, the shariah board interlock, and presence of female shariah scholars all were positively associated with credit ratings. This study suggests that Islamic banks can access more funds with higher shariah compliance. As such, we concluded that evaluating organizations’ credit ratings must consider shariah governance attributes as determinants of the credit rating of Islamic banks.

No abstract

This paper investigates the effect of bank competition and financial stability on economic growth by examining panel-data from 38 European countries over 2001 to 2017. Bank competition is measured with the Boone indicator, and bank stability with Z-scores and non-performing loan ratios, all at the country level. This study employs a fixed-effect estimator, as well as a system generalized method of moment (GMM) estimator to control unobserved heterogeneity, endogeneity, the dynamic effect of economic growth, and reverse causality in its estimation. Results show that bank stability significantly contributes to economic growth in Europe. Economic growth falls during crisis periods (both the global financial crisis and the local banking crisis), highlighting the importance of a resilient banking system during crisis periods. Moreover, empirical outcomes show that lower banking competition supports economic growth and increases financial stability. This study provides a framework for banks and regulators to boost economic growth through the channel of banking stability.

This study examines the impact of family control on the dividend policy of firms in Pakistan, covering the period from 2009 to 2016. It also investigates whether family control moderates the impact of firm-specific factors on the dividend policy. The GMM model for panel data estimation is used. The mean difference univariate analysis shows that family firms differ from nonfamily firms based on financial characteristics. The multivariate analysis shows that family firms pay lower dividends than nonfamily firms. Besides, firm size inversely affects the dividend policy, whereas tangibility positively affects it. Moreover, family control does not moderate the impact of all firm-specific factors on the dividend policy. Overall, family control, size, and tangibility are found to be the main determinants of the dividend policy in Pakistan.