Diversity and the Performance of Selected Financial Institutions of Asia

Linking with the business case for diversity, this study examines whether the top management team (TMT) and the board of directors (BODs) diversity has a positive impact on financial institution (FI) performance in select countries of Asia least researched domain. We use data from 119 financial institutions across Asia for the year 2015, initially 1,447 institutions; however, incomplete data was excluded from final analysis. We use three proxies for diversity, that is, nationality diversity, gender diversity, and age diversity of TMT and BODs. To investigate the impact of TMT and BODs diversity, cross-sectional ordinary least-squares estimation is applied, using Return on Average Assets (ROAA%) as a measure of performance. We find that nationality diversity and age diversity is positively and significantly related to FIs performance. Our evidence indicates that executives and board members with diverse exposure and younger age improve FIs profitability. However, there is no significant relationship between gender and FIs performance.

Does Poverty Reduction Cause Economic Development

Extreme poverty is a threat faced by billions of people making economic development as a chief goal for most of the countries all over the world. Having a deep understanding of the whole gamut of poverty, this study attempts to empirically investigate that whether a causal link exists between poverty reduction and economic development or not? And if it exists, then what is the direction of that causal link. The Panel data cover 26 developing countries, on the basis of the availability of data, for the years from 1994 to 2015. Through Co-integration to Pairwise Granger Causality Test & Granger Causality based on VEC Model, this study analyses the causality between poverty reduction and economic development. This study, apart from poverty reduction, also incorporates some other independent variables affecting economic development. The trickle-up theory, adopted in this study, explains the channels through which poverty reduction could cause economic development. The main conclusion drawn from the empirical results is that a causal link running from poverty reduction to economic development exists. This implies that poverty reduction causes economic development.

Determinants of Investment Trading Behaviour in Pakistan

This study aims to investigate the individual or retail investors investment behavior to know that individual demographics and financial factors such as gender, age, educational status, income, and investment levels determine their investment trading behavior amongst three domains namely fundamental, market events and personal factors. We have found that demographic characteristic such as marital status does not play any significant role in determining their investment trading behavior. The structured survey is used to collect data through a personal administration of individual investors belonging to PSX and brokerage firm. Further we use ANOVA and multiple regression to analyze the data collected from primary methods. The evidence suggests that retail investors’ self-confidence is function of both expected and unexpected changes in the market and personal factors which shape the retail investors trading behaviors. The self-confidence and portfolio size are positively related which means that over confident individual investors believe that they have great knowledge and skills. This relationship would help them to perform better than others as over confidence leads them to hold big portfolios

Selecting Optimal Portfolio in Pakistan

This study aims to identify the number of stocks required to form a well-diversified portfolio in Pakistan. To identify the optimal number of securities we collected data from Bloomberg for the period of 2009-2015. Companies are randomly selected from the Pakistan Stock Exchange. The 40 portfolios are formed by adding different securities (without replacement) by assigning equal weights to all the securities. The study concludes that a portfolio of 20 securities can diversify significant amount of risk

Impact of Risk on Use of Trade Credit: Empirical Evidence from Non-financial Firms in Pakistan

The study investigates the behavior of non-financial firms towards the use of trade credit where they have borrowing constraints in a developing economy. In spite of tremendous change in how businesses raise financing, many businesses still use trade credit as an alternative source of financing. The study is helpful in decision making for business schemes to occupy the risk factor in profit generation through the use of trade credit. Due to lack of funding’s for the businesses there is increase in risk the borrower become unable to run the business and therefore want to get finance or goods from any external source that fulfills the objective of the business as the suppliers. Banks require the collateral against the loan offered, as the risky customer has unable to provide any security to be pledged, trade credit serves the best means of short term loan for the customer. The buyer already in risky position tries to find out the short term means that are convenient and less time consuming for the businesses. Panel data has been used for working. The data on which the working is applied consisted of fifteen years i.e: from 2001-2015. The methodology used in the working is the Generalized Method of Moments (GMM). GMM is helpful for the problem raised because of the correlation amount the independent variables and the error term known as endogeneity problem as well as the heterogeneity of firms. J-statistics indicates that the instruments applied in the model are significant.

Financial Development and Economic Growth Nexus in Pakistan: An Analysis of Bound Testing Approach

This study researches on the financial development and economic growth in Pakistan. The study demonstrates the correlation connecting financial development and economic growth from the range of time, 1974 - 2014. For checking the stationarity of variables, Augmented Dickey-Fuller (ADF) and Philip-Peron (P.P) unit root technique is applied. To elaborate long-run relationship, ARDL (autoregressive distributed lag) and Bound test is conducted. By ARDL technique, study investigate that Gross Domestic Product, Money supply, Exchange rate, Gross fixed capital formation, Domestic Savings and Trade Openness are assimilated. According to research findings: economic growth directly related to money supply (M2) and domestic saving in long-run but money supply illustrates insignificant impact. The study uses GDP as endogenous variable and represents Economic growth. While M2 as exogenous variable which represents financial development and financial liberalization. Current researches seek to establish direct relation of economic growth with trade openness and money supply. Pakistani researchers aim to examine the association of economic policies with financial satisfaction over the globe.

Retail Trader’s Noise risk and closed-end fund pricing puzzle Investor Sentiment Model for Closed-end Equity Funds Pricing Puzzle an Empirical Study

This empirical study investigates the rationale for the United States (US) closed-end equity fund discounts using investor sentiment approach of C. Lee, Shleifer, and Thaler (1991) for the period from 2004 to 2013. The result of this study suggests that discounts on closed-end equity funds decrease when small stocks return increase. The closed-end fund discounts have the significant stronger correlation with small capitalization as compared to large company’s stock returns. The results indicate that similar noise trading risk generated by retail traders explains the fluctuations in closed-end fund discounts and small capitalization equity returns even after controlling for fundamental factors. The results validated the existence of noise traders in market producing stochastic demand and supply based on their belief, subsequently affecting closed-end equity fund price in the market.

Potential of Livestock TAKAFUL in Pakistan: An Empirical Investigation

Livestock sector in Pakistan is among top countries in the production of animal and dairy product. The country has witnessed an increasing trend in milk production during the last 5 years particularly in Punjab province. There are numerous risks associated with livestock which threaten the viability of this important sector. Most important of these risks and uncertainties are natural disasters including flood, heavy rainfall, and earthquake etc. All these risks play important role in the productivity of livestock sector. Livestock insurance is one of the options to mitigate the potential impacts of such natural calamities. This study is designed to investigate the demand for livestock insurance in Punjab province of Pakistan. Three Tehsils from central Punjab namely Lahore, Kasur and Raiwind, were selected as universe of the study. A total of 250 dairy farmers were interviewed using a structured questionnaire during January to March 2015. Descriptive statistics and binary logistic regression were used to assess the potential demand for livestock TAKAFUL (Islamic Insurance) in the study area. The results point to the significance of number of animals, ratio of farm income to household income, desire to increase herd strength and livestock farm quality in respondents’ willingness to pay for livestock TAKAFUL. The findings urged provision of Shariah compliant product for farmers and training in livestock management

Impact of Trade Credit on Sales Growth: An Empirical Study Based on Cement Sector of Pakistan

Trade credit management is considered very important in the field of finance for most of the firms. This study throws light on the management of current assets and current liabilities in relation to the trade credit. Trade credit has been a growing source of finance of industrial sector in Pakistan. In this study, the main aim is to analyze the role of trade credit in upgradation of cement sector. To achieve this object, data was taken from the annual financial reports of 17 firms listed cement sector in Pakistan Stock Exchange (PSX). The analyses have been carried out by using the data of 8 years, starting from year 2007 to 2014. Apparently not much work has been done to find out the success or failure of the business units selling cement on credit terms under market conditions prevailing in Pakistan. It was interesting to study the relation of trade credit and sales growth with respect to a developing nation like Pakistan. Panel data (fixed effect) model was used for the estimation of results decided on the basis of Hausman test. In addition to use of trade credit as independent variable, control variables (age, size and lagged sales growth) were also added in the model. Findings of the study show that trade credit has very significant positive affect on sales growth of the firms proclaiming the recommendation for the use of trade credit to enhance the revenues.

Investment and Cash Flow Sensitivity under Investment Opportunities: Evidence from Pakistani Manufacturing Firms

This paper examines the relationship between cash flow and investment under high and low investment opportunities of 167 Pakistani non-financial manufacturing firms listed in the Pakistan Stock Exchange during the period 2004-2013. Tobin’s Q is employed to capture the investment opportunities and sales are taken as control variable. A panel regression model is used to investigate the relationship of cash flow, Tobin’s Q and sales on investment. In case of high investment opportunities firms, the relationship of investment and cash flow is positive and significant while under low investment opportunities firms, this relationship is also positive but insignificant. These results indicate that the high opportunities firms rely mostly on internally generated cash flow whereas the low investment opportunities firms prefer to distribute its earnings as a dividend.