Econometric Analysis of Investment and Internal Finance under Asymmetric Information: A Case Study of Manufacturing companies of Pakistan

  • Dr Mohammad Salih Memon
  • AKMAL KHAN
  • Aisha Bashir Shah
  • Maria Shaikh
  • Dr.Faiz Muhammad Shaikh

Abstract

The current research investigates Econometric Analysis of Investment and Internal Finance under Asymmetric Information: A Case Study of Manufacturing companies of


Pakistan.  This study also aims to explore the relationship between internal finance and corporate investment outlays of Pakistani manufacturing firms in the presence of asymmetric information in the capital market. The fixed effect model has been employed on a sample of conveniently selected 272 listed manufacturing firms (with 2720 observations) over the period 2001 to 2010. Two different proxies of asymmetric information (i.e. Firm size & age) are used. Based on each of these two measures the sample is split into two subsamples (i.e. Small & large size and young & old firms respectively). Firms with small size and young firms are facing the asymmetric information while the other two subsamples are not considered so. The results based on all of the two measures indicate that there is a statistically significant and positive relationship between investment and internal finance or the cash flows. The investment of those firms where there is asymmetric information (i.e. small size, and young firms) such firms are more sensitive to the changes in their internal finance.

Author Biographies

Dr Mohammad Salih Memon

Director: Industrial Liaison & Placement Bureau, Associate Professor
Business Administration (SALU) Khairpur

AKMAL KHAN

Lecturer Sargodha University Lyallpur Campus Faisalabad

Aisha Bashir Shah

Assistant Professor-IBA-Unicversity of Sindh-Jamshoro

Maria Shaikh

Assistant Professor-IBA-University of Sindh-Jamshoro

Dr.Faiz Muhammad Shaikh

Assistant Professor-SZABAC-Dokri

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Published
2017-04-28
How to Cite
SALIH MEMON, Dr Mohammad et al. Econometric Analysis of Investment and Internal Finance under Asymmetric Information: A Case Study of Manufacturing companies of Pakistan. INTERNATIONAL JOURNAL OF MANAGEMENT & INFORMATION TECHNOLOGY, [S.l.], v. 12, n. 1, p. 3067-3080, apr. 2017. ISSN 2278-5612. Available at: <http://cirworld.com/index.php/ijmit/article/view/6060>. Date accessed: 23 oct. 2017. doi: https://doi.org/10.24297/ijmit.v12i1.6060.
Section
Articles

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