Impact of Financial Liberalization on Financial Performance in Pakistan: A Study on Textile Sector of Pakistan

Abstract

The research study has aimed to investigate the impact of financial liberalization on financial performance in textile sector of Pakistan. In this study, financial liberalization was used as independent variable. Return on assets, return on equity, and market capitalization (representing financial performance) were used as dependent variables. Additional control variables used were firm size, firm age, sales growth, and leverage. Annual financial statements of textile firms listed on Pakistan Stock Exchange were secondary sources of data that were employed for data collection. To assess the relationship between the variables under investigation, data relevant to financial liberalization, return on assets, return on equity, and market capitalization from the period of 2002 to 2021 (20 years) was collected. Data analysis was done by using Stata Software with the help of correlation and regression analysis (statistical tests). Findings of correlation analysis have revealed a substantial positive association between financial liberalization and financial performance (return on assets, return on equity, and market capitalization). Findings of regression analysis have further supported the results of correlation analysis by proving the positive effect of financial liberalization on financial performance (return on assets, return on equity, and market capitalization) of Pakistani textile firms. Based on the findings, it was proved that increase in financial liberalization brings a definite increase in financial performance of Pakistani textile firm, and vice versa.