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Paper Title: Debt maturity Structure, Firm Value and Underinvestment Incentive - The Case of Pakistan
Abstract:
 
This study examines the potential interaction of a firm’s financing and investment decision using the panel data of Pakistani non-financial listed firms from 1999 to 2008. Furthermore it studies broadly how Pakistani firms manage the underinvestment and liquidity risk. To estimate the effects of this decision, the study has incorporated four simultaneous equations using partial dynamic adjustment model to estimate the results. Findings of this study are more likely to be consistent with the literature which explains that Pakistani high growth firms depend on high leverage strategy and give more importance to underinvestment risk rather than liquidity risk. Furthermore, growing Pakistani firms are not adopting low leverage strategy ex ante to participate the future growth opportunities ex post. It is also investigated that Pakistani firms are not paying any attention to use the mix of debt maturity that affects the firm investment decision and firm value.

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