Family Control and Investment Cash Flow Sensitivity in Distressed Pakistani Firms: Moderating Effect of Board Independence

Abstract

In the emerging country like Pakistan Family control businesses play important role in economy growth. This research thesis focuses on the impact of family control on investment-cash flow sensitivity and explore the effect of family control on investment-cash flow sensitivity. Independent Board may moderate between the investment cash flow sensitivity and family control with the mitigation of the agency cost. So for this purpose I have taken data of 80 distressed firms of Textile sector listed in stock exchange of Pakistan from 2015 to 2020. The data have been collected from annual reports and Balance sheet analysis report published by state bank of Pakistan. This research thesis on Investment of non-financial firm of Pakistan is Quantitative Research and also Causal Research, Panel Data Regression used. The observed analysis was showed by investment equation, descriptive statistics, correlation Matrix and analysis all three approach of regression such as random effect, fixed effect and common effect model and selected fixed model through using Huasman test. This research thesis indicates that Investment-cash flow sensitivity is low in the firm which is controlled by families with more share percent or with excess rights. It is to recommended that the Policy maker must focus on the increase the number of independent director which will help to mitigate the agency problem