Investment-Cash Flow Sensitivity and Financing Constraints: Study of Pakistani Business Group Firms

Mehmood, Yasir; Hasnu, Syed Amjad Farid

doi:10.2139/ssrn.3471042

Cited by 5 publications

(15 citation statements)

References 34 publications

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“…Leverage means the firms can easily obtain loans in the times of financial need. The B.G AFs are having higher leverage relatively NAFs (Mehmood and Farid Hasnu, 2019). B.G AFs have easy access to the external financial markets (Aggarwal et al, 2019).…”

Section: Leveragementioning

confidence: 99%

“…Conversely, NAFs are high risky and face more changing threats thats why study is more emphasized on AFs and NAFs of Pakistan. The study of Mehmood and Farid Hasnu (2019) suggested that if the credit is a main problem for the entrepreneur, then the firm is financially constrained and vice versa. Their results confirmed that the firms having a positive sensitivity of cash holding and cash flows are more likely to be the financially constrained.…”

Section: Multiple Linear Regression Modelmentioning

confidence: 99%

“…We measured financing constraints by the investment cash flow sensitivity and the formula of investment CF sensitivity is the current year cash flows divided by the previous year investment. The study of Mehmood and Farid Hasnu (2019) described that firms are financially constrained if the firms are highly sensitive to the cash flows. Similarly, Bhaduri (2005) found that the B.G AFs do not face financial constraints.…”

Section: Financing Constraints (Fc)mentioning

confidence: 99%

“…Cash flows can be calculated as Earnings Before Interest and Taxes (EBIT), Depreciation and Amortization. Mehmood and Farid Hasnu (2019) have investigated that firm's investment is very CF-sensitive. Therefore, cash flow is measured as (EBIT+Depreciation)/ Total Assets.…”

Section: Cash Flows (Cf)mentioning

confidence: 99%

See 3 more Smart Citations

The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

Aslam¹,

Sohail²

2021

JBR

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The main purpose of this study is to investigate the relationship between Cash Flows, Growth Opportunities, Firm Size, Firm Age, Firm Performance, Investment, Financial constraints and Leverage between the B.G AFs and NAFs of Pakistan. Current study consists of the balanced panel data containing 86 B.G AFs vs. 90 NAFs of the Pakistan. This study covers the yearly data period from 2007 to 2017. The findings showed that the cash flows are positively correlated with the return on assets, investments, financial constraints, while leverage is negatively correlated with the financial constraints. The positive correlation between cash flows and return on asset is higher for the B.G AFs, which means the B.G AFs are more profitable than the NAFs. The correlation of cash flows with the investment and financial constraints is positive but lower for the B.G AFs, showing that AFs investment is less sensitive and less financially constrained than NAFs. The inverse correlation between leverage and financial constraints shows that the B.G AFs have easy access to the financial sources. The positive and higher correlation of growth opportunities with cash flows and return on assets shows that the AFs growth is higher than NAFs.

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Section: Leveragementioning

confidence: 99%

Section: Multiple Linear Regression Modelmentioning

confidence: 99%

Section: Financing Constraints (Fc)mentioning

confidence: 99%

Section: Cash Flows (Cf)mentioning

confidence: 99%

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The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

Aslam¹,

Sohail²

2021

JBR

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“…According to Di, Shaiban, and Hasanov (2021), higher level of dividend yields results in high market value, thus resulting in stable stock market prices, resulting in lower volatilities. Whereas high fluctuations in the dividend yield, lower level of shareholders wealth and low dividend payout ratio results in high level of stock market volatility (Liaqat, Nazir, & Ahmad, 2019;Mehmood & Farid Hasnu, 2019). 2015) by employing the model presented by (Baskin, 1989) reported that dividend payments are inversely associated with SPV in context of PSX.…”

Section: Literature Reviewmentioning

confidence: 99%

Effect of Dividend Policy Decision on Share Price Volatility (SPV) of Modaraba Companies Listed in Pakistan Stock Exchange (PSX)

Siddique¹

2020

JISR-MSSE

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This study aims to test the relationship between dividend policy decisions on the share price Volatility of Modaraba Companies quoted in the Pakistan stock exchange. The data for empirical analysis was collected from the Pakistan stock exchange, Recorder archive, and Ksestocks.com. By using the sampling technique, a sample of 19 Modaraba Companies was taken from 2010 to 2018. The empirical analysis was conducted using multiple regression techniques by employing a fixed effect model on panel data. This study also incorporated four control variables (size, growth, operating earning & level of debt) in empirical analysis to avoid multicollinearity problems between dividend policy measures and spurious regression. The results of the study validate the theory of relevance of dividend policy decisions on share price Volatility. Dividend policy has a negative and significant bearing on Stock price volatility. Higher leverage (debt level) leads to higher instability in stock prices. Firm earning volatility is positively associated with share price volatility. Firm size and firm's growth in terms of assets also has a negative but insignificant impact on share price Volatility

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Corporate governance looking back to look forward in Pakistan: a review, synthesis and future research agenda

et al. 2022

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The basic aim of this paper is to systematically review the corporate governance research trends in Pakistan and to give directions for future researchers in this field. The methodology adopted in this paper is “Systematic Literature Review,” 108 papers have been used from the period 2002–2020 along with 17 research theses in this study. The findings of this study show two trends in corporate governance research first one form 2008 to 2016 and the second one is from 2017 to 2020. The first trend shows that corporate governance (variables) is linked with traditional topics such as firm performance, dividend policy, capital structure, cost of capital and earnings management. The theory which is mostly used in the first corporate governance trend is the agency theory. In the second trend, corporate governance (variables) are linked with multiple issues while taking various theoretical perspectives such as risk taking, tunneling, CSR, investment portfolios, board-related issues, financial distress and much more. This paper has identified and filled the research gap by writing a comprehensive review paper of the prevailing corporate governance literature and has given directions for future researchers to consider it. To the best of researchers’ knowledge, this is the first study that has systematically reviewed and synthesized the corporate governance literature by adopting the systematic literature review methodology in Pakistan an emerging economy. It is an extensive effort for the purpose to encourage the interested researchers/scholars to add and expand their contributions to the corporate governance literature in Pakistan on the potentially identified areas of corporate governance.

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Investment-Cash Flow Sensitivity and Financing Constraints: Study of Pakistani Business Group Firms

Cited by 5 publications

References 34 publications

The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

The Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan

Effect of Dividend Policy Decision on Share Price Volatility (SPV) of Modaraba Companies Listed in Pakistan Stock Exchange (PSX)

Corporate governance looking back to look forward in Pakistan: a review, synthesis and future research agenda

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