Effects Of Asymmetric Information On Decision Dilemma In Formulating Maritime Financial Strategy And Sensitive Capital Investments

Abstract

Cash flow has been major determinant of investment in the most of the studies conducted in the area of finance. So have the studies related to financing of ships related investment projects within the maritime industry. However, the exact role of cash flow to determine the investment specially in the maritime sector remained ambiguous.  This research has been conducted mainly to investigate the relationship between investment and internal generated fund while the information is asymmetric in the maritime and financial realms of Pakistan.  The Q model of investment has been used to investigate this relationship. The GMM model has been applied to test the hypothesis by using the balanced panel annual data of Pakistani listed non-financial KSE 100 index firms for the period 2009 to 2018.  The empirical analysis includes 100 sample firms with 600 observations.  The five measures of asymmetric information (i.e. Tobin’s Q, ownership concentration, firm size, profitability and the financial leverage) have been used in this study.  The results derived by using all five measures of asymmetric information confirm the positive and statistically significant relationship between internal finance and firm’s investment when firms have information which is asymmetric in nature. This study contributes to the investment decisions in maritime markets as well as other capital markets that are imperfect, consisting of information asymmetries.