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Development Financing and Economic Governance: Analysis of the Liquidity Crisis and Circularity Debts in Pakistan

Author

Listed:
  • Khan, Dr. Muhammad Irfan
  • Mehar, Dr. Muhammad Ayub
  • Iqbal, Dr. Athar Iqbal

Abstract

Purpose: This paper is based on the models derived by the researchers to explain the patterns of corporate governance, firms’ financial policies and liquidity position. Methodology: A deductive approach has been adopted to reconcile and examine the different models of corporate governance and firms’ financial policies. Findings: The study showed that corporate savings is a good predictor of the macro level investment in a country. The magnitude of national investment will increase by improvement in corporate savings. In fact the corporate savings indicate the expansion in business activities which may be an indicator of the trust and confidence of private sector. On the other hand it explains the financial health of corporate sector, which may provide the significant portion of tax revenue to the government for developing projects in public sector. The study has concluded that corporate governance is a significant variable in determining the liquidity and circularity debts. In this way corporate governance becomes a crucial determinant of the national investment. Implications:The bad corporate governance may deteriorate the investment activities at national level, which may damage the economy for a longer term. This study also indicates that capital structure and the patterns of ownership play important role in the determination of corporate governance of an institution.

Suggested Citation

  • Khan, Dr. Muhammad Irfan & Mehar, Dr. Muhammad Ayub & Iqbal, Dr. Athar Iqbal, 2015. "Development Financing and Economic Governance: Analysis of the Liquidity Crisis and Circularity Debts in Pakistan," MPRA Paper 80745, University Library of Munich, Germany, revised Dec 2016.
    • Handle: RePEc:pra:mprapa:80745
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    References listed on IDEAS

    as
    1. Oliver E. Williamson, 2005. "The Economics of Governance," American Economic Review, American Economic Association, vol. 95(2), pages 1-18, May.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
    4. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    5. Pedro J. García‐Teruel & Pedro Martínez‐Solano & Juan Pedro Sánchez‐Ballesta, 2009. "Accruals quality and corporate cash holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(1), pages 95-115, March.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Zheka Vitaliy, 2010. "The impact of corporate governance practices on dynamic adjustment of capital structure of companies in Ukraine," EERC Working Paper Series 10/07e, EERC Research Network, Russia and CIS.
    8. P. J. Lund & K. Holden, 1968. "An Econometric Study Of Private Sector Gross Fixed Capital Formation In The United Kingdom, 1923–1938," Oxford Economic Papers, Oxford University Press, vol. 20(1), pages 56-73.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate Governance; Gross Fixed Capital Formation; Development Finance;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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