Downside Systematic Risk in Pakistani Stock Market: Role of Corporate Governance, Financial Liberalization and Investor Sentiment
Hussain, Shahzad and Akbar, Muhammad and Malik, Qaisar and Ahmad, Tanveer and Abbas, Nasir (2021) Downside Systematic Risk in Pakistani Stock Market: Role of Corporate Governance, Financial Liberalization and Investor Sentiment. Working Paper 14. Centre for Applied Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University. (Submitted)
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Hussain et al - CAFE WP14 - CG and Downside Risk in Pakistan.pdf - Accepted Version Download (651kB) |
Abstract
Purpose –We examine the impact of corporate governance, investor sentiment and financial liberalization on downside systematic risk and the interplay of socio-political turbulence on this relationship through static and dynamic panel estimation models.
Design/methodology/approach – Our evidence is based on a sample of 230 publicly listed non-financial firms from Pakistan Stock Exchange (PSX) over the period 2008-2018. Furthermore, we analyze the data through Blundell and Bond (1998) technique in full sample as well sub-samples (Big & Small Firms).
Findings –We document that corporate governance mechanism reduces the downside risk, whereas, investor sentiment and financial liberalization increase the investors’ exposure toward downside risk. Particularly, the results provide some new insights that the socio-political turbulence as a moderator weakens the impact of corporate governance and strengthens the effect of investor sentiment and financial liberalization on downside risk. Consistent with prior studies, the analysis of sub-samples reveal some statistical variations in large and small-size sampled firms. Theoretically, the findings mainly support agency theory, noise trader theory and the Keynesians hypothesis.
Originality/value –Stock market volatility has become a prime area of concern for investors, policy makers and regulators in emerging economies. Primarily, the existence of market volatility is attributed to weak governance, irrational behavior of market participants, liberation of financial policies and sociopolitical turbulence. Therefore, the present study provides simultaneous empirical evidence to determine whether corporate governance, investor sentiment and financial liberalization hinder or spur downside risk in an emerging economy. Furthermore, our work relates to a small number of studies that examine the role of socio-political turbulence as a moderator on the relationship of corporate governance, investor sentiment and financial liberalization with downside systematic risk.
| Item Type: | Monograph (Working Paper) | ||||
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| Identification Number: | 14 | ||||
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| Subjects: | CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance | ||||
| Divisions: | Faculty of Business, Law and Social Sciences > College of Accountancy, Finance and Economics > Centre for Accountancy Finance and Economics Faculty of Business, Law and Social Sciences > College of Accountancy, Finance and Economics Faculty of Business, Law and Social Sciences > College of Business, Digital Transformation & Entrepreneurship |
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| Depositing User: | Muhammad Akbar | ||||
| Date Deposited: | 27 May 2021 14:59 | ||||
| Last Modified: | 20 Jun 2024 12:05 | ||||
| URI: | https://www.open-access.bcu.ac.uk/id/eprint/11694 |
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