The present study examines bi-directional contemporaneous and lead–lag relationships between investor sentiment and market returns in the emerging market of Pakistan over the period of 2006 to 2016. To measure investor sentiment, the study employs a direct proxy namely Google search volume index (GSVI) and nine other indirect proxies. Besides conventional regression and VAR model, the study applies Geweke’s (1982) tests to investigate the nature of relationships between sentiment and returns. Thus, the study adds to existing literature by providing latest and thorough statistical evidence on the role of investor sentiment in influencing market returns. The study finds sufficient evidence regarding irrational behavior of investors in the thin market of Pakistan. In particular, the results indicate substantive role of sentiment in dragging stock market away from its sustainable path as implied by economic fundamentals.
Dividend policy is one of the widely addressed topics in financial management. It is an important duty of a financial manager to formulate the company's dividend policy that is in the best interest of the company. Many a time financial managers are involved in earnings management practices with the intention of adjusting dividends. The present study has been carried out to scrutinize the effect of earnings management on dividend policy. The researchers have taken the data of 86 listed companies for the year 2004 to 2009. The researchers have measured the dividend policy by using dividend payout ratio while Modified Cross Sectional Jones Model (1995) has been employed to measure the earnings management. The results of the common effect model show that there is not any significant relationship among earnings management and dividend policy. Moreover, smaller companies are paying more dividends as compared to larger companies. This study reveals that involvement of managers is not for dividend policy. There might be some other motives behind the earnings management.
This study investigates the relationship of mergers & acquisitions with the interest spread of the banking industry in Pakistan. To assess whether the merger of Pakistani banks were a success or otherwise, profitability, liquidity ratios, and net interest spread are computed which are considered essential to judge the financial performance of any bank. Data is taken for the period of 1997-2010 and this data have been used to calculate the interest spread and market concentration. Market Concentration is calculated by using Herfindahl-Hirschman Index or HHI. Findings show that the profitability and net interest spread of two merged banks declines as a result of mergers. It is also revealed that Concentration of the banking industry shows a rising trend during 2008 and 2009 after mergers occurred during 2007 as a result of merger. However, it shows the level that almost approaches the threshold i.e. 1000. One or two more mergers can push up threshold level of HH index. It means that it is the right time for banking industry of Pakistan to be reviewed by any antitrust authority to maintain the optimum level of competition.
Dividend policy is one of the widely addressed topics in financial management. It is an important duty of a financial manager to formulate the company's dividend policy that is in the best interest of the company. Many a time financial managers are involved in earnings management practices with the intention of adjusting dividends. The present study has been carried out to scrutinize the effect of earnings management on dividend policy. The researchers have taken the data of 86 listed companies for the year 2004 to 2009. The researchers have measured the dividend policy by using dividend payout ratio while Modified Cross Sectional Jones Model (1995) has been employed to measure the earnings management. The results of the common effect model show that there is not any significant relationship among earnings management and dividend policy. Moreover, smaller companies are paying more dividends as compared to larger companies. This study reveals that involvement of managers is not for dividend policy. There might be some other motives behind the earnings management.
This study explores the history of stock market crisis in the emerging market of Pakistan from different perspectives over the period July-1997 to December-2016. To identify and measure the timing of crises occurrence and their various dimensions (magnitude of crisis, days to recovery, duration of crisis, depth of crisis, size of crisis, etc.), CMAX methodology is employed. Thus, the study adds to existing literature by studying the Pakistani market in this regard and also proposing a method to quantify the intensity of crisis (within CMAX framework). The results indicate that the two major crises of 1997-2002 and 2008-2012 are found to coincide with a number of major financial, economic and political crises in Pakistan and around the world.
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