Suchergebnisse

The debate over =why capital and bond markets remain
under-developed in Pakistan' is more than two decades old. Several
conceptual papers have highlighted causes responsible for the
underdevelopment of these markets; however, not enough empirical
evidence exists to support the theoretical claims. This paper tries to
fill in this gap. Specifically, this paper draws on the recent
developments in the area of law and finance to develop several
hypotheses related to maturity of corporate debt and judicial
efficiency. These hypotheses are tested using data of 370 firms listed
at the Karachi Stock Exchange (KSE) and 27 districts high courts of
Pakistan over the period 2000 to 2006. Results indicate that corporate
debt-maturity decreases with the inefficiency of judiciary. Furthermore,
results show that worsening judicial efficiency has greater negative
effect on debt-maturity of small firms than on debt-maturity of large
firms. Similarly, worsening judicial efficiency negatively affects
debt-maturity ratios of firms with fewer tangible assets than
debt-maturity ratio of firms with more tangible assets. JEL
classification: G10, G21, G32 Keywords: Judicial Efficiency,
Debt-maturity, KSE, Capital Market Development, Law and
Finance

This study investigates the endogenous determination of firm
efficiency and leverage while testing the competing hypotheses of agency
cost, efficiency-risk and franchise-value, in a sample of 136
non-financial firms listed on the Pakistan Stock Exchange (PSX), over
the period 2002 to 2012. Data Envelopment Analysis (DEA) method is
employed to measure firm efficiency as proxy for firm performance. The
endogenous nature of firm efficiency and leverage allowed using
two-stage least square (2SLS) technique. The findings of the efficiency
equation suggest that leverage has a significant positive effect on firm
efficiency. Additionally, firm risk, growth rate, size, board size and
board composition positively affect firm efficiency. On the other hand,
the results of the leverage equation suggest that firm efficiency has a
significant negative effect on leverage. Firm size and CEO duality have
positive effects on leverage while firm age, board composition,
institutional ownership, managerial ownership and asset tangibility have
negative effects on leverage. Generally, the results support agency cost
and franchise-value hypotheses that higher leverage improves firm
efficiency while higher firm efficiency results in reduced leverage.
Keywords: Leverage, Firm Efficiency, Capital Structure, Firm
Performance, Data Envelopment Analysis

This study examines several aspects of the momentum
strategies, such as profitability, risk-based explanation, and
decomposition of the momentum profits. For this purpose, we use weekly
and monthly data of 581 firms listed at the Pakistan Stock Exchange
(PSX) for the period 2004-2014. We found the presence of momentum
profits over short and long-horizons, while majority of the contrarian
profits were observed only in the presence of penny stocks that have
share prices of PKR 10 or less. As a robustness check, we computed
returns through the weighted relative strength scheme (WRSS) procedure
and average cumulative abnormal returns (ACARs). Interestingly, the
results reported through WRSS have shown a similar pattern to that
obtained through average cumulative abnormal returns (ACARs). Further,
to know which factor contributes more to momentum and contrarian
profits, we used the model proposed by Lo and MacKinlay (1990). Our
findings show that the overreaction effect is the largest contributing
factor of contrarian profits in PSX, while cross-sectional risk is the
second largest factor and negatively affects the contrarian profits.
Moreover, the lead-lag effect contributes positively to the contrarian
profits. Similarly, the largest contributing factor for momentum profits
is the underreaction effect, whereas cross-sectional risk is the second
largest factor that positively affects momentum profits. Unlike
contrarian profits, lead-lag effect reduces the momentum profits in the
PSX.

Empirical evidence to identify factors that are responsible
for the sluggish development of bond and capital markets in Pakistan
remains scanty. This paper is a step forward in this direction.
Specifically, this paper draws on the recent developments in the area of
law and finance to formulate several propositions on how judicial
efficiency can have a differential impact on corporate capital
structures of small and large firms. These propositions are tested using
data of 370 firms listed at the Karachi Stock Exchange (KSE) and 27
districts high courts of Pakistan. The results indicate that leverage
ratio decreases, when judicial efficiency decreases; however, this
relationship is not statistically significant. This is due to the
composition effect. Allowing judicial efficiency to interact with the
included explanatory variables, the results show that worsening judicial
efficiency increases leverage ratios of large firms and decreases
leverage ratios of small firms, which is an indication of the fact that
creditors shift credit away from small firms to large firms in the
presence of inefficient judicial system. Results also indicate that the
effect of inefficient courts is greater on leverage ratios of firms that
have fewer tangible assets as percentage of total assets than on
leverage ratios of firms that have more tangible assets. The results
indicate that under inefficient judicial system creditors reduce their
lending to small firms and firms with little collateral and redistribute
the credit to large firms. This is why judicial inefficiency does not
change volume of credit, but changes distribution of the credit. These
results highlight the importance of judicial efficiency for small firms
in the determination of their capital structures. JEL Classification:
G10, G21, G32 Keywords: Judicial Efficiency, Leverage, KSE, Capital
Market Development, Law and Finance.

Previous studies on capital structure in Pakistan have
reported evidence in support of the pecking order theory. However, this
evidence is largely based on testing one dimensional relationship
between leverage ratios and firms' profitability. The objective of this
paper is to extensively test the pecking order theory in Pakistan with
well-known pecking order testing models. Specifically, we use a sample
of 321 firms listed on the Karachi Stock Exchange from 2000 to 2009 and
test pecking order theory with models suggested by Shyam-Sunder and
Myers, Frank and Goyal, Watson and Wilson, and Rajan and Zingales.
Results of these models indicate that there exits only weak evidence in
support of pecking order theory in Pakistan. However, strong support is
found for pecking order theory when leverage ratios are regressed on
profitability ratio, along with a set of control variables. This
discrepancy in the results of the two sets of models needs further
investigation, as well as care in interpreting the results of existing
studies on capital structure in Pakistan. Our results show robustness
even after controlling for possible profits understatements or weak
corporate governance practices. JEL Classification: G10, G21, G32
Keywords: Pecking Order Theory, Profitability-Leverage Relation,
KSE

Capital structure refers to the different options used by a
firm in financing its assets. Generally, a firm can go for different
levels/mixes of debts, equity, or other financial arrangements. It can
combine bonds, TFCs, lease financing, bank loans or many other options
with equity in an overall attempt to boost the market value of the firm.
In their attempt to maximise the overall value, firms differ with
respect to capital structures. This has given birth to different capital
structure theories that attempt to explain the variation in capital
structures of firms over time or across regions. On the other hand,
empirical evidence is also not sometime consistent in substantiating a
particular capital structure theory.