Open AccessThe Role of Financial Constraints in Business Environment; Evidence from Business Group Affiliated and Non-Affiliated Firms in Pakistan
Author(s) -
Saba Aslam,
M. Sohail
Publication year - 2021
Publication title -
jinnah business review
Language(s) - English
Resource type - Journals
eISSN - 2307-7921
pISSN - 2070-0296
DOI - 10.53369/bdvy5725
Subject(s) - leverage (statistics) , cash , business , finance , panel data , cash flow , investment (military) , positive correlation , negative correlation , monetary economics , economics , financial system , econometrics , mathematics , medicine , politics , political science , law , statistics
The main purpose of this study is to investigate the relationship between Cash Flows, Growth Opportunities, Firm Size, Firm Age, Firm Performance, Investment, Financial constraints and Leverage between the B.G AFs and NAFs of Pakistan. Current study consists of the balanced panel data containing 86 B.G AFs vs. 90 NAFs of the Pakistan. This study covers the yearly data period from 2007 to 2017. The findings showed that the cash flows are positively correlated with the return on assets, investments, financial constraints, while leverage is negatively correlated with the financial constraints. The positive correlation between cash flows and return on asset is higher for the B.G AFs, which means the B.G AFs are more profitable than the NAFs. The correlation of cash flows with the investment and financial constraints is positive but lower for the B.G AFs, showing that AFs investment is less sensitive and less financially constrained than NAFs. The inverse correlation between leverage and financial constraints shows that the B.G AFs have easy access to the financial sources. The positive and higher correlation of growth opportunities with cash flows and return on assets shows that the AFs growth is higher than NAFs.