Journal of Finance and Accounting Research

Assessment of Government Intervention in Microfinance Banks of Pakistan

Amina Rizwan, Talha Zubair Ahmad Khan, Rubeena Tashfeen — Fri, 04 Oct 2024 00:00:00 +0000

This paper presents a panel data study of microfinance banks in Pakistan. The data includes a random sample of financial statements from 8 microfinance banks over the period from 2011-2015, totaling 40 firm year observations. The study aims to evaluate the effect of government interventions on these microfinance banks and brings up a statistically critical assessment of various government policies applied to the sector. To quantify the effects of government intervention, panel data analysis is conducted. For a better selection of model, the Hausman’s specification test is employed. The random effect model was found suitable for analysis. Using statistical tools, this paper investigates the causal effect of government regulations, government grants, market size, and governmental audits on the profit ratios of microfinance institutes. This is one of the few studies that investigates the impacts of the small and medium sized government policies on microfinance bank from inception of these policies. By analyzing the period during which these policies were first implemented, the study provides a clear and direct picture of the relationship between governmental policy and SME entities. Taking a snapshot of the impacts in the beginning provides undiluted results that are not confounded by other environmental and regulatory effects. The results show that most of the variables used in the study, such as market size and number of audits are significantly related, while government grants have an insignificant relationship with the performance of microfinance banks. The study makes a significant contribution by demonstrating that government policies and grants have limited impact on SME performance and should be reevaluated, while they should rely more on audits.

Role of Managerial Innovation Behavior for moderating the effect of the Dynamic Innovation Capability on Banking Performance: Evidence from Pakistan

Zahid Bashir, Maryam Ashraf, Hina Arif — Thu, 12 Dec 2024 00:00:00 +0000

The current study attempts to address the role of dynamic innovation capabilities, along with innovative work behavior of managerial employees, to explain banking performance in Pakistan. Furthermore, it also examines the moderating role of innovative work behavior. For testing the set of proposed hypotheses, the data was collected from 413 participants working at managerial positions in different banks across Pakistan. The study employed Structural Equation Modeling (SEM) to achieve the research objectives. The results revealed internal and external reliability and validity along with a statically fit model. It was found that innovation capabilities, especially organizational innovation and process innovation, along with managerial innovation behavior have a strong optimistic effect on banks’ performance in Pakistan. Furthermore, innovative work performance strongly moderates the impact of dynamic innovation capabilities on banking performance in Pakistan. The study has managerial and practical implications for policymakers, leaders, higher management, and decision-makers in the banking sector of Pakistan. Furthermore, limitations and suggestions for future research are also incorporated.

Behavioral Finance: Impact of Psychology, Market Forces, and Social Influence on Portfolio Returns

Naveed Ul Haq, Uzma Kashif, Rabia Shahzad, Ali Sajjad, Saira Sharif — Wed, 18 Dec 2024 00:00:00 +0000

Traditional finance assumes rational decision-making in the stock market. This is challenged by behavioural finance, which postulates that cognitive biases, market dynamics, and social persuasion influence investors. Hence, this study on 300 retail investors at the Pakistan Stock Exchange (PSX) explores the impact of these factors on portfolio returns. The results indicate that cognitive biases, such as anchoring and overconfidence, lead to suboptimal decisions. Conversely, investors attuned to market dynamics make more successful choices, while resistance to social persuasion enhances decision quality. The findings highlight the need for investor awareness and mitigation of cognitive biases. Fund managers should incorporate these insights into strategies and regulators should educate investors on biases, while implementing policies against market manipulation.

Nonlinear Spillovers from Stock, Gold, Oil, and T-bill Volatilities to Predict Economic Policy Uncertainties

Rukhsana Bibi, Mobeen Aslam Butt, Naveed Raza, Kalsoom Akhtar — Fri, 27 Dec 2024 00:00:00 +0000

Economic policy uncertainity (EPU) shapes the economic development of a country and any instability in policy results in financial markets downturn. Several elements are considered as predictors of EPU. Of these, commodities (oil, gold) are the most common. This study consider financial markets with four major asset classes gold, crude oil, 10-year treasury bonds, and stock prices to examine a nonlinear and asymmetric spillover that influences EPU. The dataset comprises oil price volatility, gold price volatility, T-bills volatility, stock price volatility, and the EPU index of eight countries. NARDL model is used to capture the impact of the nonlinear behavior of uncertainties on gold, oil, T-Bills, and stock market volatilities. It captures both long-run and short-run non-linearities by separating explanatory variables into partially positive and partially negative components. The outcomes reveal positive and negative shocks to oil price volatility, gold price volatility, T-Bills volatility, and stock price volatility which positively affect the EPU of all countries. However, Canada does not bear any effect of negative shocks in the short-run to gold price and oil price volatilities to predict the EPU. USA shows the negative impact of negative shocks for all asset classes. T-Bills derived negative shocks adversely affect China at 5% level of significance. Furthermore, the effect of positive shocks is more pronounced than negative shocks. The outcomes support the short-run and long-run asymmetric impact of oil, gold, T-Bills, and VIX volatilities to predict EPU. This study helps investment funds in managing risk, asset pricing, and formulating economic policy differentiated to positive and negative shocks.