Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan
This study examines the potential interaction of a firm’s financing and investment decisions. It studies broadly how firms manage underinvestment and liquidity risks. To estimate the effects of these decisions, the study has incorporated four simultaneous equations using the partial dynamic adjustm...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Lahore School of Economics
2018-05-01
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| Series: | The Lahore Journal of Business |
| Subjects: | |
| Online Access: | https://journals.lahoreschool.edu.pk/LJB/LJB/article/view/65 |
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| _version_ | 1850075121351393280 |
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| author | Syed Sikander Ali Shah Ali Murad Syed Sana Sheikh |
| author_facet | Syed Sikander Ali Shah Ali Murad Syed Sana Sheikh |
| author_sort | Syed Sikander Ali Shah |
| collection | DOAJ |
| description |
This study examines the potential interaction of a firm’s financing and investment decisions. It studies broadly how firms manage underinvestment and liquidity risks. To estimate the effects of these decisions, the study has incorporated four simultaneous equations using the partial dynamic adjustment model. Panel data of non-financial Pakistani firms have been used in this study. The findings of this study demonstrate that Pakistani high growth firms depend on high-leverage strategies and give greater importance to underinvestment risk rather than liquidity risk. Furthermore, growing Pakistani firms are not adopting low-leverage strategies ex ante to participate in future growth opportunities ex post. This study also examines whether or not Pakistani firms are paying special attention to the mixing of debt maturity that affects the firm’s investment decisions and its value.
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| format | Article |
| id | doaj-art-e39ddbb9de724beca1cdc319f0167bd3 |
| institution | DOAJ |
| issn | 2223-0025 2791-3139 |
| language | English |
| publishDate | 2018-05-01 |
| publisher | Lahore School of Economics |
| record_format | Article |
| series | The Lahore Journal of Business |
| spelling | doaj-art-e39ddbb9de724beca1cdc319f0167bd32025-08-20T02:46:24ZengLahore School of EconomicsThe Lahore Journal of Business2223-00252791-31392018-05-0162Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of PakistanSyed Sikander Ali Shah0Ali Murad Syed1Sana Sheikh2PhD Scholar, University of Management and Technology, Pakistan. Assistant Professor, College of Business Administration, Imam Abdul Rahman Bin Faisal University, Saudi Arabia PhD Scholar, National College of Business Administration and Economics, Pakistan. This study examines the potential interaction of a firm’s financing and investment decisions. It studies broadly how firms manage underinvestment and liquidity risks. To estimate the effects of these decisions, the study has incorporated four simultaneous equations using the partial dynamic adjustment model. Panel data of non-financial Pakistani firms have been used in this study. The findings of this study demonstrate that Pakistani high growth firms depend on high-leverage strategies and give greater importance to underinvestment risk rather than liquidity risk. Furthermore, growing Pakistani firms are not adopting low-leverage strategies ex ante to participate in future growth opportunities ex post. This study also examines whether or not Pakistani firms are paying special attention to the mixing of debt maturity that affects the firm’s investment decisions and its value. https://journals.lahoreschool.edu.pk/LJB/LJB/article/view/65Liquidity riskunderinvestmentfirm valueleveragedebt maturity |
| spellingShingle | Syed Sikander Ali Shah Ali Murad Syed Sana Sheikh Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan The Lahore Journal of Business Liquidity risk underinvestment firm value leverage debt maturity |
| title | Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan |
| title_full | Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan |
| title_fullStr | Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan |
| title_full_unstemmed | Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan |
| title_short | Debt Maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan |
| title_sort | debt maturity structure firm value and underinvestment incentive the case of pakistan |
| topic | Liquidity risk underinvestment firm value leverage debt maturity |
| url | https://journals.lahoreschool.edu.pk/LJB/LJB/article/view/65 |
| work_keys_str_mv | AT syedsikanderalishah debtmaturitystructurefirmvalueandunderinvestmentincentivethecaseofpakistan AT alimuradsyed debtmaturitystructurefirmvalueandunderinvestmentincentivethecaseofpakistan AT sanasheikh debtmaturitystructurefirmvalueandunderinvestmentincentivethecaseofpakistan |