br Empirical results br Conclusions

Empirical results
Conclusions and implications This study examined the co-movement and volatility spillover dynamics between Islamic and conventional index in Pakistan considering SBI-0206965 from 3rd September, 2008 to 30th September, 2015. This study applied various economic techniques to examine the association between Islamic and conventional indices. The stationarity of the data sets was tested by using unit root tests namely Phillips and Perron (1988) and Dickey and Fuller (1979). The long run relationship was examined using Johansen and Juselius (1990) cointegration test. The short run association was tested by using VECM model. The volatility spillover dynamics was examined using GARCH and EGARCH models. Furthermore the robustness of the results was tested using Granger causality test, impulse response function, and variance decomposition analyses. The results highlighted certain interesting findings. This study finds significant long run and short run association between the Islamic and conventional indices. Furthermore, this study also finds significant bidirectional volatility spillover between Islamic and conventional index. The EGARCH model confirmed asymmetric volatility spillover between the two indices. This study finds bidirectional causal association between Islamic and conventional indices, conforming strong lead lag association between the two indices. The variance decomposition analyses confirmed that both indices explain variations in their variance. The impulse response function showed that the Islamic and conventional indices respond positively to the shocks of each other. In sum, this study finds strong co-movement and volatility spillovers between Islamic and conventional index in Pakistan.
Introduction Firms often face the problem of financing in every worthwhile investment decision making. Corporate investments could be funded either internally, such as retained earnings, accumulated profits in the form of various reserves, depreciation provision, or externally, which include but not limited to debt/external loan. In finance literature, studies show that corporate investments can be affected by firm-specific or financial factors such as leverages (debt), cash flow (retained earnings), sales, and stock of Liquid assets (Adelegan Ariyo, 2008; Inessa Zicchino, 2006). These authors state the roles played by financial factors on corporate investment and express different conclusion. While some debunk the view of the neoclassicists (Modigliani Miller, 1958) of irrelevance financial factors (e.g. Bhagat Obreja, 2013) other authors express that, in an imperfect capital market, internal and external capitals are not perfect substitutes (Hu Schiantarelli, 1998). Meanwhile, those authors that debunk neoclassicists’ views, empirically, come up with mixed results. Some authors affirm that financial factors have positive effect on investment; others confirm negative relationship (Bhagat Obreja, 2013). The neoclassicists state that financial factors enter through the cost of capital which, in turn, is independent of the way the firm finances growth and investments. This independence arises because capital markets are assumed to be perfect which may not be true in the modern capital market system. Of recent, another trend of empirical studies emerges which analyzes institutional factors as another constraint and relate these factors to many finance and economic variables. For instance, Scholars (e.g Sarkar Hasan, 2001) believe that the level of institutional quality (in terms of corruption, rule of law and political stability) varies across economies, industries and regions. On C value basis, the effect of institution also differs among industrial setting. Studies relate institutional quality with variables such as growth, foreign direct investment and domestic investment. While on the nexus between institution quality (such as control of corruption) and investment, the available evidences provide mixed results as well (Mauro, 1995; Tanzi Davoodi, 1997). Some show that a corrupt institution does not deter investment to expand and grow (e.g, Tanzi Davoodi, 1997), other studies take the opposite view by emphasizing that corruption deters investment (Mauro, 1995; O’Toole Tarp, 2014). Tanzi and Davoodi (1997) states that corruption increases public investment but inefficient productivity arises (also see Asiedu Freeman, 2009 for the nexus). Wheeler and Mody (1992) show that institutional quality has no significant effect after using US-firm level data. We note that most of these studies are cross-countries studies focusing on developed and emerging economies while studies on sub-Saharan Africa and/or a single country study is largely absent. Specifically, little or nothing is known about sub-Saharan African countries despite the fact that the effect of institutional quality may vary across regions and countries. Our study fill this gap by examine the effect of institutional and financing constraints on corporate investment in Nigeria. This study is a single country study using Nigeria as a case study.