International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies


:: International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies

ISSN 2228-9860
eISSN 1906-9642


Vol.12(1) (2021)

  • Dynamic Measuring the Impacts of Financial Fragility on the Performance of Non-Financial Firms Listed at the Pakistan Stock Exchange

    Muhammad Munir Ahmad (Department of Commerce, Allama Iqbal Open University, Islamabad, PAKISTAN),
    Salman Ali Qureshi (Department of Business Administration, Allama Iqbal Open University, Islamabad, PAKISTAN),
    Muhammad Bilal (Department of Business & Economics, FG Sir Syed College, Rawalpindi, PAKISTAN),
    Naveed (Department of Management Sciences, Qurtuba University of Science and Information Technology, Peshawar, PAKISTAN),
    Asif Mehmood Rana (Department of Business Administration, Federal Urdu University of Arts, Science & Technology, Islamabad, PAKISTAN).

    Disciplinary: Financial and Management Sciences.

    ➤ FullText

    doi: 10.14456/ITJEMAST.2021.13

    Keywords: Firm performance; Financial fragility; Fixed effect; Random effect; Pooled OLS; Non-fragile firm; Financial equity.

    Financial fragility (FFR) is of great importance due to its impacts on the dynamics of firms. This paper explores the presence of FFR and its impacts on the performance of manufacturing firms listed at the Pakistan Stock Exchange (PSX) for 2010-2019. The sample data set is split based on median values of fragility, age, and size of the firms, and then classified as fragile, non-fragile, large, small, old, and younger firms. Using the fixed effect, random effect, and pooled OLS techniques to examine relationships among the variables, the Return on Assets, and Tobin's Q ratios are used as performance measures that show the negative relationship with FFR. Firms with good equity ratios are good performers due to their financial strength. Younger firms are better performers than older firms are, but FFR plays an adverse role for all firms. Larger firms' performances are better, compared to smaller firms. The presence of fragility does not hamper the performance of large size firms while small-size firms are more affected. The study results suggest utilizing retained earnings and reducing dependence on debt financing to improve the financial performance of fragile firms.

    Paper ID: 12A1M

    Cite this article:

    Ahmad, M. M., Qureshi, S. A., Bilal, M., Naveed, Rana, A. M. (2021). Dynamic Measuring the Impacts of Financial Fragility on the Performance of Non-Financial Firms Listed at the Pakistan Stock Exchange. International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies, 12(1), 12A1M, 1-10.


  1. Agarwal, Rajshree, & Gort, M. (2002). Firm Product Life cycles, and firm survival. American Economic Review, 92(2), 184-190.
  2. Agliari, A., Gatti, D. D., Gallegati, M., & Lenci, S. (2006). The Complex Dynamics of Financially Constrained heterogeneous firms. Journal of Economic Behavior & Organization, 81(4), 784-803.
  3. Arslan, O., Florackis, C., & Ozkan, A. (2006). The role of cash holdings in reducing investment-cashflow sensitivity: Evidence from a financial crisis period in an emerging market. Emerging Markets Review, 7(4), 320-338.
  4. Baker, M., Stein, J. C., & Wurgler, J. (2003). When does the market matter? Stock prices, and the investment of equity-dependent firms. Quarterly Journal of Economics, 118(3), 969-1005.
  5. Beck, T. (2012). Finance, and growth-lessons from the literature, and the recent crisis. LSE Growth Commission, 3, 1-6.
  6. Carletti, E. (2008). Competition, and regulation in banking. Handbook of Financial Intermediation, and Banking, 126(5), 449-482.
  7. Chan, K. S., Dang, V. Q., & Yan, I. K. (2012). Financial reform, and financing constraints: Some evidence from listed Chinese firms. China Economic Review, 23(2), 482-497.
  8. Chathoth, P. C., & Olsen, M. D. (2007). Does Corporate Growth Really matter in the restaurant industry? International Journal of Hospitality Management, 26(1) 66-80.
  9. Chen, Q., Goldstein, I., & Jiang, W. (2007). Price Informativeness, and Sensitivity to Stock Price Investment. The Review of Financial Studies, 20(3), 619-650.
  10. Clementi, G. L., & Hopenhayn, H. A. (2006). A theory of financing constraints, and firm dynamics. Quarterly Journal of Economics, 121(1), 229-265.
  11. Coricelli, F., & Masten, I. (2004). Growth, and volatility in transition countries: The role of credit. Festschrift in Honor of Guillermo A. Calvo. Washington DC: International Monetary Fund. April. Fama, E. F., & French, K. R. (2005). Financing decisions: who issues stock? Journal of Financial Economics, 76(3), 549-582.
  12. Fazzari, S. M., Hubbard, R. G., Petersen, B. C., Blinder, A. S., & Poterba, J. M. (1988). Financing Constraints, and Corporate Investment; Comments, and Discussion. Brookings Papers on Economic Activity, 1988(1), 1-45.
  13. George, R., Kabir, R., & Qian, J. (2011). Investment-cash flow sensitivity, and financing constraints: new evidence from Indian business group firms. Journal of Multinational Financial Management, 21(2), 69-88.
  14. Hong, Z., Shuting, Y., & Meng, Z. (2012). Relationship between free cash flow, and financial performance evidence from the listed real estate companies in China. IPCSIT, 36, 331-335.
  15. Hubbard, R. (1998). Capital-Market Imperfections, and Investment. Journal of Economic Literature, 36(1), 193-225.
  16. Kalkan, A., Erdil, O., & ?etinkaya, ?. (2011). The relationships between firm size, prospector strategy, architecture of information technology, and firm performance. Procedia-Social, and Behavioral Sciences, 24, 854-869.
  17. Kaplan, S. N., & Zingales, L. (1997). Do investment-cash flow sensitivities provide useful measures of financing constraints?. The Quarterly Journal of Economics, 112(1), 169-215.
  18. Kiymaz, H. (2006). The impact of announced motives, financial distress, and industry affiliation on shareholders' wealth: Evidence from large sell-offs. Quarterly Journal of Business, and Economics, 45(3/4), 69-89.
  19. Loderer, C., & Waelchli, U. (2009). Firm age, and performance. University Library of Munich, Germany.
  20. Majumdar, S. K. (1997). The impact of size, and age on firm-level performance: some evidence from India. Review of Industrial Organization, 12(2), 231-241.
  21. Mao, Z., & Gu, Z. (2008). The relationship between financial factors, and firm performance: empirical evidence from US restaurant firms. Journal of Foodservice Business Research, 11(2), 138-159.
  22. Minetti, R., & Zhu, S. C. (2011). Credit constraints, and firm export: Microeconomic evidence from Italy. Journal of International Economics, 83(2), 109-125.
  23. Modigliani, F., & Miller, H. M. (1958). The Cost of Capital, Corporation Finance and Theory of the Investment. The American Economic Review, 48(3), 261-297.
  24. Moyer, R. C., McGuigan, J. R., & Kretlow, W. J. (2001). Contemporary Financial Management. Mason: South-West Cengage Learning.
  25. Myers, S. C. (1984). The capital structure puzzle. Journal of Finance, 39(3), 575-592.
  26. Shumway, T. (2001). Forecasting bankruptcy more accurately: A simple hazard model. Journal of Business, 74(1), 101-124.
  27. Stein, J. C. (2003). Agency, information, and corporate investment. In Handbook of the Economics of Finance, Vol. 1, 111-165, Elsevier.
  28. Villalonga, B. (2004). Diversification discount or premium? New evidence from the business information tracking series. The Journal of Finance, 59(2), 479-506.
  29. Vitali, S., Battiston, S., & Gallegati, M. (2016). Financial fragility, and distress propagation in a network of regions. Journal of Economic Dynamics, and Control, 62, 56-75.
  30. Wu, M. L. (2006). Corporate social performance, corporate financial performance and firm size: A meta-analysis. Journal of American Academy of Business, 8(1), 163-171.

Other issues:


Call-for-Scientific Papers
Call-for-Research Papers:
ITJEMAST invites you to submit high quality papers for full peer-review and possible publication in areas pertaining engineering, science, management and technology, especially interdisciplinary/cross-disciplinary/multidisciplinary subjects.

To publish your work in the next available issue, your manuscripts together with copyright transfer document signed by all authors can be submitted via email to Editor @ (no space between). (please see all detail from Instructions for Authors)

Publication and peer-reviewed process:
After the peer-review process (4-10 weeks), articles will be on-line published in the available next issue. However, the International Transaction Journal of Engineering, Management, & Applied Sciences & Technologies cannot guarantee the exact publication time as the process may take longer time, subject to peer-review approval and adjustment of the submitted articles.