This study empirically examines the impact of managerial ability on firm performance. Using the sample of 246 firms listed at Pakistan Stock Exchange during 2009 to 2017, this study finds that more able managers significantly increase the firm performance while less able managers significantly reduce the firm performance. These findings hold for both accounting and market measures of firm performance as well as alternative measures of managerial ability. Further, we control for endogeneity and cross-sectional variation issues using 2SLS and Fama-MacBeth methods, respectively. Overall, we conclude that able managers enhance the firm value, and the effects are stronger in financially constrained firms. This study provides fresh evidence that able managers bring intangible resources in the firms, which positively contribute to the firm performance even in the challenging environment and the weak legal systems.

Purpose: The purpose of this study is to examine whether corporate social responsibility (CSR) affects dividend policy (the propensity to pay dividends as well as the dividend payout ratio) and what role family ownership plays in this regard in an emerging market.Design/methodology/approach: The study uses a sample of 1,480 observations from Pakistan for the period 2010–2016 and accounts for Hackman self-selection bias and endogeneity issues using a robust regression analysis. CSR activity is measured by CSR score developed through a content analysis of firms' annual reports.Findings: The study finds that the greater number of CSR activities increases the propensity to pay dividends, but reduces the dividend payout in dividend-paying firms. On the other hand, in family firms, the greater number CSR activities decreases the propensity to pay dividends, but increases the dividend payout in dividend-paying firms. The findings hold for a series of robustness and sensitivity checks, for example, alternative measures, specifications and estimators.Practical implications: A trade-off between firms' CSR activities and dividend policy needs to be the point of concern for investors, minority shareholders and policy makers. The role of the non-executive and independent directors becomes more important, especially in the family firms where family members sitting on the boards may drive CSR activities in their own interests opportunistically. The potential opportunistic behaviour of family members warrants the need for policy reform initiatives to strengthen the protection of other stakeholders' interests.Originality/value: The study highlights that family owners' efforts to preserve their socio-emotional wealth in family firms affect the relationship between CSR activities and dividend policy. Further, the relationship between CSR and dividend policy in emerging markets is different from developed markets. This study simultaneously focuses on both the propensity to pay dividends and the amount of dividend payment and documents that the implications of CSR are different for them.

Purpose: Investor sentiment (optimism or pessimism) may influence investors to follow others (herding) while taking their investment decisions. Herding may result in bubbles and crashes in the financial markets. The purpose of the study is to examine the presence of herding and the effects of investor sentiment on herding in China and Pakistan.Design/methodology/approach: The investor sentiment is captured by five variables (trading volume, advance/decline ratio, weighted price-to-earnings ratio, relative strength index and interest rates) and a sentiment index developed through principal component analysis (PCA). The study uses daily prices of 2,184 firms from China and 568 firms from Pakistan for the period 2005 to 2018.Findings: The study finds that herding prevails in China while reverse herding prevails in Pakistan. Interestingly, as investors become optimistic, herding in China and reverse herding in Pakistan decrease. This indicates that herding and reverse herding are greater during pessimistic periods. Further, the increase in herding in one market reduces herding in the other market. Moreover, optimistic sentiment in the Chinese market increases herding in the Pakistani market but the reverse is not true.Practical implications: Considering the greater global financial liberalization, and better opportunities for emotion sharing, this study has important implications for regulators and investors. Market participants need to understand the prevalent irrational behavior before trading in the markets.Originality/value: Since individual proxies may depict different picture of the relationship between sentiment and herding therefore the study also develops a sentiment index through PCA and incorporates this index in the analysis. Further, this study examines cross-country effects of herding and investor sentiment.

The goal of this study was to analyze the influence of corporate social responsibility on dividend pay-out while considering the role of corporate governance quality on mutual funds operating in Pakistan. This study used a two-step system generalized method of moments (GMM) to control not only endogeneity problems caused by inclusion of firm-specific variables, but also the endogeneity caused by dividend pay-out selection. The findings are that mutual funds that engage in higher levels of corporate social responsibility pay greater dividends. The quality of corporate governance not only has a strong positive impact on mutual fund’s dividend pay-outs, but also moderates the association between dividend pay-out and corporate social responsibility. Furthermore, differences exist between socially responsible Islamic and conventional mutual funds in terms of dividend pay-out policy. These findings imply that the quality of corporate governance performs a substantial role in dividend decisions. Policymakers and regulators should also encourage asset management firms to improve corporate governance quality and engage in more socially responsible activities, which can lead to improved fund performance and dividend pay-out.

We examine two types of political connections on trade credit of Pakistani firms over 2009–2015; parliamentarian connections are divided into the senate, national assembly, and provincial level, while bureaucrat connections cover civil and military officers and individuals working on government committees. We documented evidence that parliamentarian connections have significant preferential access to trade credit while bureaucratic political connections decrease the firm’s access to trade credit. These findings are more pronounced in the presence of CEO political connection. Our results stay robust using alternative proxies and accounting for endogeneity and time-invariant concerns. Additional analysis reveals that politically connected firms with higher leverage and low market power use more trade credit. Moreover, low economic developed regions decrease the benefits of political connections to access trade credit.