SHORT-TERM FINANCING AND RISKADJUSTED PROFITABILITY: EVIDENCE FROM PAKISTAN

Syed Hamid Ali Shah, Attaullah Shah

Abstract


This study explores the impact of short-term financing on the
operational performance of firms and the relationship of the former
to risk-adjusted profitability. The sample consists of 352 nonfinancial
firms listed on the KSE (now Pakistan Stock Exchange)
from 2003 to 2014. We use several dynamic panel data estimation
techniques and find that short-term financing is positively but
insignificantly related to firms’ profitability. As far as short-term
financing and risk-adjusted profitability are concerned, the results
confirm the hypothesis that short-term financing has no impact on
risk-adjusted profitability under GMM estimation procedure. This
study contributes to the literature as no prior study exists on the
association of risk-adjusted profitability and short-term financing.


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