IDEAS home Printed from https://ideas.repec.org/a/ebj/ijpssr/2026v5iia1.html

Market Competition, Industrial Policy and Corporate Risk-Taking: Evidence from Pakistani Enterprises

Author

Listed:
  • Tauseeq Muhammad Sabar
  • Nawaz Rao Sabir

Abstract

This study evaluates the impact of industrial policy and market competition on corporate risk-taking using data from Pakistani firms. This study reveals that industrial policy (IP), measured by IP-hat, consistently reduces corporate risk-taking across multiple model specifications. The relationship between market competition (HHI) and risk-taking shows methodological sensitivity, while Pooled OLS estimates indicate significant negative effects from both high and low competition levels, these effects become statistically insignificant in fixed effects models that control for firm-level heterogeneity. This suggests that observed competition effects may stem from time-invariant firm characteristics rather than dynamic market changes. Furthermore, we find no significant interaction between industrial policy and market competition, indicating that policy effects operate independently of market structure. These results highlight the risk-suppressing nature of IP in emerging economies and underscore the importance of methodological considerations in competition studies. The findings carry important implications for policymakers designing industrial policies that balance firm support with innovation incentives in developing markets.

Suggested Citation

  • Tauseeq Muhammad Sabar & Nawaz Rao Sabir, 2026. "Market Competition, Industrial Policy and Corporate Risk-Taking: Evidence from Pakistani Enterprises," International Journal of Politics & Social Sciences Review (IJPSSR), International Journal of Politics & Social Sciences Review (IJPSSR), vol. 5(I), pages 1-8.
    • Handle: RePEc:ebj:ijpssr:2026v5iia1
    as

    Download full text from publisher

    File URL: https://ojs.ijpssr.org.pk/index.php/ijpssr/article/download/212/154/1714
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Indrarini Laksmana & Ya-wen Yang, 2015. "Product market competition and corporate investment decisions," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 14(2), pages 128-148, May.
    2. Nakano, Makoto & Nguyen, Pascal, 2012. "Board size and corporate risk-taking: Further evidence from Japan," MPRA Paper 38990, University Library of Munich, Germany.
    3. Nissanke, Machiko, 2019. "Exploring macroeconomic frameworks conducive to structural transformation of sub-Saharan African economies," Structural Change and Economic Dynamics, Elsevier, vol. 48(C), pages 103-116.
    4. Indrarini Laksmana & Ya-wen Yang, 2015. "Product market competition and corporate investment decisions," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 14(2), pages 128-148, May.
    5. Baker, Malcolm & Wurgler, Jeffrey, 2013. "Behavioral Corporate Finance: An Updated Survey," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 357-424, Elsevier.
    6. Servaas Storm, 2017. "The Political Economy of Industrialization: Introduction to Development and Change Virtual Issue," Development and Change, International Institute of Social Studies, vol. 48(6), pages 1-19, November.
    7. repec:osf:socarx:gsyq4_v1 is not listed on IDEAS
    8. Indrarini Laksmana & Ya-wen Yang, 2015. "Product market competition and corporate investment decisions," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 14(2), pages 128-148, May.
    9. Mahdi Salehi & Ali Daemi & Farzana Akbari, 2020. "The effect of managerial ability on product market competition and corporate investment decisions," Journal of Islamic Accounting and Business Research, Emerald Group Publishing Limited, vol. 11(1), pages 49-69, January.
    10. Réka Juhász & Nathan Lane & Dani Rodrik, 2024. "The New Economics of Industrial Policy," Annual Review of Economics, Annual Reviews, vol. 16(1), pages 213-242, August.
    11. Kose John & Lubomir Litov & Bernard Yeung, 2008. "Corporate Governance and Risk‐Taking," Journal of Finance, American Finance Association, vol. 63(4), pages 1679-1728, August.
    12. Sadaf Ali & Ajid ur Rehman & Muhammad Jawad & Munazza Naz, 2024. "Product market competition and investment efficiency nexus with mediating effect of firm risk-taking in Pakistan," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(3), pages 488-499, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Yan & Wu, Fang, 2025. "Tax enforcement and corporate overinvestment: Evidence from China’s STB-LTB merger," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1212-1231.
    2. Yang, Baochen & Xu, Jingru & Dai, Yuxuan & Zhang, Yongjie & Geng, Peixuan, 2025. "Commodity financialization and firm investment:Implications for market efficiency and economic stability in emerging markets," International Review of Economics & Finance, Elsevier, vol. 99(C).
    3. Yue, Shuai & Anderson, Hamish D. & Liao, Jing, 2025. "Who does not advance loses ground: Green investment as a strategic response by small and medium-sized enterprises to economic policy uncertainty," Energy Economics, Elsevier, vol. 148(C).
    4. Liguang Zhang & Wanyi Chen & Liao Peng, 2023. "The impact of tax enforcement on corporate investment efficiency: evidence from the tax administration information system," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 1635-1669, June.
    5. Deng, Hong & Li, You & Lin, Yongjia, 2023. "Green financial policy and corporate risk-taking: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PB).
    6. Aman, Hiroyuki & Nguyen, Pascal, 2013. "Does good governance matter to debtholders? Evidence from the credit ratings of Japanese firms," Research in International Business and Finance, Elsevier, vol. 29(C), pages 14-34.
    7. Luis Otero-González & Luis-Ignacio Rodríguez-Gil & Milagros Vivel-Búa & Aracely Tamayo-Herrera, 2022. "Family Ownership, Corporate Governance and Risk-Taking," JRFM, MDPI, vol. 15(3), pages 1-15, February.
    8. Fabrizio Rossi & Richard J. Cebula, 2015. "Does the Board of Directors Affect the Extent of Corporate R&D? Evidence from Italian listed companies," Economics Bulletin, AccessEcon, vol. 35(4), pages 2567-2580.
    9. Sabri Boubaker & Pascal Nguyen & Wael Rouatbi, 2016. "Multiple Large Shareholders and Corporate Risk†taking: Evidence from French Family Firms," European Financial Management, European Financial Management Association, vol. 22(4), pages 697-745, September.
    10. Ziyi Zhao & Banghao Zhou, 2022. "Latecomers’ Isomorphic R&D Strategy and the Relationship With Performance: A Study on Chinese Pharmaceutical Firms," SAGE Open, , vol. 12(2), pages 21582440221, May.
    11. Cao, Yue & Dong, Yizhe & Ma, Diandian & Sun, Li, 2021. "Customer concentration and corporate risk-taking," Journal of Financial Stability, Elsevier, vol. 54(C).
    12. Yung, Kenneth & Nguyen, Trung, 2020. "Managerial ability, product market competition, and firm behavior," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 102-116.
    13. Alzayed, Noora & Batiz-Lazo, Bernardo & Eskandari, Rasol, 2024. "Does board diversity mitigate risk? The effect of homophily and social ties on risk-taking in financial institutions," Research in International Business and Finance, Elsevier, vol. 70(PA).
    14. He, Feng & Ding, Cong & Yue, Wei & Liu, Guanchun, 2023. "ESG performance and corporate risk-taking: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    15. Huang, Ying Sophie & Wang, Chia-Jane, 2015. "Corporate governance and risk-taking of Chinese firms: The role of board size," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 96-113.
    16. Waseem, Fareeha, 2023. "Impact of Managerial Entrenchment on Firm Performance," OSF Preprints hmuab, Center for Open Science.
    17. Henrique Castro Martins, 2020. "The Brazilian bankruptcy law reform, corporate ownership concentration, and risk‐taking," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(4), pages 562-573, June.
    18. Safiullah, Md & Akhter, Tanzina & Saona, Paolo & Azad, Md. Abul Kalam, 2022. "Gender diversity on corporate boards, firm performance, and risk-taking: New evidence from Spain," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    19. Boubaker, Sabri & Nguyen, Pascal & Rouatbi, Wael, 2012. "Large shareholders and firm risk-taking behavior," MPRA Paper 39005, University Library of Munich, Germany.
    20. Wang, Shanyong & Xu, Baolong, 2024. "Environmental protection tax policy and corporate risk-taking: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 96(PA).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebj:ijpssr:2026v5iia1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hazrat Bilal (email available below). General contact details of provider: http://www.ijpssr.org.pk .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.