cg in pakistan- adopt or adapt

8/6/2019 CG in Pakistan- Adopt or Adapt

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Corporate Governancein Pakistan

Adopt or Adapt?

University of Cambridge Research

By

Mahwesh Mumtaz


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DECLARATION OF ORIGINALITY

This dissertation is substantially my own work and conforms to the Judge

Institute guidelines on plagiarism. Where reference has been made to

other research this is acknowledged in the text and bibliography


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Abstract

This study discusses the implications for Pakistan, as it adopts the Anglo-Saxon model of

corporate governance. It explores the causes of impediments that policymakers face as

they try to implement the Code of Corporate Governance. The empirical question that the

study poses is whether a Corporate Governance model that works for the US and the UK,

also work for a country like Pakistan? We present data and review the literature to show

that Pakistan is a country much further down on the development ladder, with ownership

structures markedly different from the diluted ownership structures of developed

countries; with its stock exchanges displaying shallowness; and its cultural underpinnings

heavily influencing how the corporate sector operates. We conclude that the ultimate

objective of the Code of Corporate Governance should be to incorporate goodgovernance into the Pakistani corporate environment, in order to enhance productivity

and efficiency, rather than trying to emulate the dynamics of those countries which

pioneered the Anglo-Saxon model. We argue that the Code for Corporate Governance

adopted by Pakistan will need to be adaptedkeeping the local business environment and

market conditions in mind. The study proposes a broader paradigm that views the

governance problem as more than mere conflict of interest between owners and managers

or minority and majority shareholders, in order to be able to devise better policies that are

tailored to the unique corporate context of Pakistan.


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Corporate Governance in Pakistan -Adopt or Adapt?

1

1 Introduction

Corporations, their conduct, and impact on the social, political and economic sphere

of their existence have been much in debate since the last century. In the recent times

this debate has only intensified; especially in the wake of Asian crises, and a series of

corporate scandals like Enron and WorldCom, much has been said and written about

good governance of corporations. In the last decade corporate governance has been a

dominant policy issue in developed and developing world alike. The issues that ensue

today relate to how these corporations ought to be governed, who should govern them

and how best to strike a balance between laissez faire and monitoring.

There are countries that have pioneered in developing various legal frameworks, and

are actively involved formulating an assortment of codes and statues that govern

them. These countries are called the origins of such codes and laws. Then there are

countries and territories that receive the laws and codes, which originated in some

other country, and adopt them. These are referred to as transplants in the literature. It

is imperative to consider that the origins have developed these laws and codes in their

unique social, political, economic and cultural context. A number of studies (Pistor et

al. 2001, 2003; La Porta et. al. 1999, 2000; Branson 2000; Roe 2003; Lincht et

al.2004) suggest that a simple adoption cannot be beneficial to the transplanting

country until and unless it is well understood and is meaningful to the users in the

country of transplant. This is because unless the regulations are relevant to the people

and their implementation holds benefits for the masses, there will be no motivation for

the recipients of the legal system to accept it and implement it. Secondly, due to the

uniqueness of each country, any law irrespective of which family it has been taken

from would need to be adapted to the transplant country. This requires institutions and

legal intermediaries, which understand the law and can make changes, thereby

making the law more pertinent to their own country, as suggested by Pistor et al.

(Pistor, 2001).

To be able to make meaningful policy recommendations, the meaning of corporate

governance needs to be understood and defined in a country with regard to its

prevailing institutions. The source of differences in countries may be entrenched in

the uniqueness of social culture, political aspects, history, structure of ownership of


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companies, level of socio-economic development, institutional and regulatory

capacity, and legality to name a few. It needs to be appreciated that the corporate

governance problems in a developing or transition economy country are likely to be

different than those of a developed market economy. This is why the solutions that

help solve the governance problems in the developed economies may not do the same

in developing countries. Developing countries need to study the unique issues they

have at hand, and then implant the relevant solutions from other countries, rather than

expecting economic turnarounds by adopting solutions of corporate governance lock,

stock and barrel.

1.2 Purpose and Significance of the Study

As the global debate on corporate governance heats, the importance of this topic to

any countryparticularly any developing countrycannot be ignored. Being one of

the important countries of South Asia, with immense trading potential and ideal geo-

political location, Pakistan has proactively pursued various policy reforms to

stimulate its economic activity, in recent years. The Securities and Exchange

Commission of Pakistan (SECP) issued the Code of Corporate Governance (referred

to hereinafter as the Code), in order to establish a framework for good governance of

companies listed on Pakistans stock exchanges. This Code drew upon policies of

good governance adhered to by the U.K. and U.S. models of corporate governance

(the anglo-saxon model). It was assumed that since the origins of Pakistans corporate

law lie in the British legal framework, it was only rational that good governance

practices in Pakistan follow those prevalent in the U.K.

However it has been repeatedly emphasized in the vast literature that spans the topic

of corporate governance, that good governance systems are not only limited to laws

and structures, even though they play an important part. What really determines the

success of a good corporate governance system is how it governs and influences the

interaction between all the stakeholders including firms, regulators, political agents,

investors, shareholders, employees. This means that the historical, social, political,

economic, and cultural influences that colour the attitudes of these stakeholders need

to be reflected in a good corporate governance system.


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This study discusses the implications for Pakistan, as it adopts the Anglo-Saxon

model of corporate governance. It explores the causes of impediments that

policymakers face as they try to implement the Code of Corporate Governance. The

empirical question that the study poses is whether a Corporate Governance model that

works for the US and the UK, also work for a country like Pakistan?

The objective of this study is to explore whether the anglo-saxon model of corporate

governance adopted by Pakistan, does indeed fulfil the requirement of being

representative of the problems that are peculiar to Pakistan. This study draws on the

data and various theories put forth regarding the transplantation of law, and extends

them to theorize the impact of transplanting such codes from the field of corporate

governance into a developing country like Pakistan. It postulates that even though

according to the path dependency argument, following the Anglo-Saxon model ofCorporate Governance may make perfect sense for Pakistan, since the roots of

Pakistani law lie in the British Common Law family, but does this mean that

transplanting this particular code of corporate governance would be successful? Can

such a model that works for the US and the UK, also work for a country like Pakistan,

which is much far down on the development ladder? What of the differences in

ownership structures, the underdeveloped capital markets, and cultural

underpinnings?

This thesis aims to observe the factors that may cause hurdles in a simple adoption of

the Anglo-Saxon model of Corporate Governance. It points out that the Code for

Corporate Governance adopted by Pakistan will need to be adapted keeping the local

business environment and market conditions in mind. This study holds significance in

terms of contributing to the under-researched area of corporate governance in a

Pakistan-specific context. There are subtleties involved in convincing the Pakistani

corporate sectorwhich tends to resist changethat good governance is for their

own benefit. This study aims to draw the attention of policymakers and implementerstowards recognizing these subtleties. It adds value to the limited research done in

Pakistan on this topic by outlining the potential sources of problems and hurdles that

will need to be removed for an effective implementation of the Code of Corporate

Governance. This study has far reaching implications on the implementation policies

as well as on espousing further research. This study forms just the groundwork of


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much more research that is needed to understand the corporate dynamics of Pakistan,

and address issues that impede the development of product and factor markets alike.

Corporate governance has received much attention worldwide since the last decade. In

Asia particularly the financial crises of the late 90s stirred much debate about the

fundamentals of firm dynamics and market interactions. Whereas previously only

financially instable economies were struck with crises, the Asian crises struck havoc

in some of the fastest growing economies of the world, causing paradigm shifts from

what was believed to be the perfect-model-of-Asian-business, into a theory that the

institutional structures may be at the root cause of the problem.

The importance of good governance cannot be emphasised enough. However, the

question that faces policymakers, governments, economists, investors and other

stakeholders at large is, what corporate governance means to themin their

particular contexts, structures and frameworks? Literature has attempted to answer

this question theoretically as well as empirically. Of late, it is being increasingly

recognized that a single set of rules-- one model of good governancedoes notsuit

all the nations. A wide area of topics that the literature covers, while attempting to

answer this question, makes it essential to first review how the definition of corporate

governance varies according to the context in which it is defined.

1.3 Corporate Governance

Efforts have been made at international and national institutional, academic and

corporate levels alike, to promote policy dialogues on corporate governance. In the

UK the Cadbury Report (1992) sought to improve standards of corporate behaviour,

following a spread of concern over financial reporting and transparency. This was

augmented 1995 by the Greenbury report (1996), and the Hampel Report (1998),

which stressed the boards of directors role in improving the value of their respective

companies.

Gillan and Starks (1998) define corporate governance as the system of laws, rules,

and factors that control operations at a company. In another paper, Gillian et al.

(2003) say that corporate governance involves the monitoring, and control of publicly

held corporations in order to ensure that the corporate agents and assets are

channelled towards achieving the corporate objectives set out by the owners of the


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company, i.e. the shareholders. Shleifer and Vishny (1997) characterise corporate

governance with the interest of economic participants. They refer to corporate

governance as dealing with the ways in which suppliers of finance to corporations

assure themselves of getting return on their investment. The differences in the

definitions of corporate governance are also reflected in the different models of

corporate governance that are used worldwide according to the unique governance

requirements of each country.

1.4 Corporate Governance Models

Globally there are several corporate governance models that have been adopted and

implemented not only by their countries of origin, but by other nations too. For

several years now there has been debate over what the perfect model for governance

is, motivating numerous academic studies, both theoretical and empirical in nature.

Comparisons between the effectiveness of Anglo-Saxon Model, German Model,

Japanese and East Asian Model of corporate governance and the ownership structures

in these countries are frequently made (La-Porta et al 1998, Franks and Mayer 1994,

Prowse 1992, Charkham 1992).

Stephen et al. (1996) point out that the US and UK models of corporate governance

are predominantly market based and resemble each other. They espouse the protection

of the minority shareholders and focus on solving the agency problem. The UK and

US models are also said to be focused on individualism and short-termism by some

critics. Independent directors on the board and a non-hierarchical board construct are

the norm. The role of the board is to monitor and evaluate the managers and to select

or remove the senior executives. The approach used for corporate governance in the

UK and US (Anglo-Saxon) is generally referred to as the shareholder approach. Like

other literature, Keasey et al. (1997) and Stephen et al. (1996), comment on the

differences in the fundamental law that governs both of them, however they claim that

both these models are more similar to each other than they are different.

Contrary to that, the German model follows what is known as the stakeholder

approach. The board is two-tiered, consisting of the supervisory board and the

management board. The shareholders interests are represented and protected by a

supervisory board that is separate from the management of the company. The German


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model enables all the stakeholders- shareholders, creditors, managers, employees,

suppliers and customers- to monitor the companys performance. On the other hand,

the Japanese model is quite unique in the sense that the most common type of

business corporation in Japan is the Kabushiki Kaisha. Banks and financial

institutions have substantial holdings of debt and equity in these corporations. The

mode of the operation of the board is hierarchical, usually with 25-50 people being on

the board.

Boot and Macey (2000) suggest that the US system of corporate governance has

received much acceptance and acclaim because of the strong protection it provides to

small stakes equity claimant. Whereas the German model has been found to provide

similar levels of protection for fixed claimants. These different models of corporate

governance allow implanting countries to choose from among the different features ofdifferent models that suit their economic set up best.

1.5 Ownership Structures and Corporate Governance

A fundamental reason why the agency problems vary from country to country is

because the ownership structures are different between these countries. The agency

problems stem from the disparity between ownership and control, giving rise to

conflicts of interest. Claessens et al. (1999) find that in East Asian countries, control

is maintained through pyramiding and cross-holdings between firms. And so thevoting rights held by the families exceed the cash flow rights that they hold, thus

influencing the decision-making.

1.6 Transplantation and Corporate Governance

The countries that transplant codes of corporate governance need to ensure that the

code recognizes the contextual nature of corporate governance and its dependence on

the legal, regulatory and institutional environment.

There have been several studies to see how the legal developments that take place in

one country can be effectively incorporated in another via the process of

transplantation (Pistor et al, 2000, 2001 and 2003, La Porta et al 1997, Rodrick 2000).

These studies also show that if a law is simply copied-and-pasted without any

adaptation to local conditions then it loses its efficiency. Although the focus of these


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empirical studies is the legal systems and the law in totality, their argument can be

extended to various codes, especially the codes of corporate governance that many

countries transplant. The codes of corporate governance are usually used in

conjunction with the corporate laws of the countries where they are implemented (La

Porta et al., 1999 and 2000, Claessens et al., 2003). This is done to enhance

monitoring, and control of publicly held corporations in order to ensure that the

corporate agents and assets are channelled towards achieving the corporate objectives

set out by the owners of the company, i.e. the shareholders (Morck, 2003). La Porta

et al. (2000) advocate that diverse elements of countries financial systems as breadth

and depth of their capital markets, the pace of new security issues, corporate

ownership structures, dividend policies, and the efficiency of investment allocation

seem to be explained conceptually as well as empirically by how well the laws of the

country protect outside investors.

Gillan and Starks (2003) argue that the governance changes have been more

pronounced in countries where there have been dramatic changes in banking sector,

capital markets, and legal systemsand particularly in those countries where there is

a strong presence of institutional investors.

There are a number of models of corporate governance that are followed in different

parts of the world today. Each model has its own unique set of characteristics that suit

the dynamics of the countries where it originated. Other countries and territories

emulate these models and adopt the ones that might fit best with their socio-economic

conditions (Claessens et al., 2000). The codes for corporate governance are codes of

best practices and do not form part of the statutory legislation in most of the countries.

This fact augments the argument that laws and codes need to be changed and

manipulated to suit the local conditions, before they can be fully implemented and

expected to work as well as they work in the country of origin. Legal scholars like

David and Brierley (1985) show that the commercial legal systems of most countriesderive from relatively few legal families, including English (common law), the

French, and the German, the latter two being derived from the Roman law. These

systems spread throughout the world through, conquest, colonialisation, and voluntary

adoption. La Porta et al. (2000) suggest that the legal families that countries have


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adopted, rather than laws having been written in response to market pressures, shape

the regulations for financial markets and companies.

There are a number of factors that need to complement each other for a transplant to

qualify as successful. The issues of governance vary from country to county

depending on the level of development of capital markets, legal institutions,

ownership structures, existing rules, codes and laws, receptiveness of masses to

change, and culture (Pistor et al., 2000, 2001, 2003). The formal law in the books

does not do much for the development of any country, unless it is used. Although it is

true that corporate governance systems sprout from legal systems, it is also true that

corporate governance tends to deal with softer issues (Roe, 2003). In order to work,

the systems of corporate governance should reflect the political and economic history

of the country as well as the social and political attitudes of the people (Charkham,1992). Pistor et al. (2003) analyse that countries, which adopt foreign law, are

frequently unprepared for it and for the changes that it brings. Their finding suggest

that legal transplants cannot function in the host countries as well as they do in the

home countries. The major factors that can help determine the success or failure of a

corporate governance code transplant include path dependence, complementary

institutions, andsocial and corporate culture.

1.6.1 Path Dependence

The path dependence argument suggests that the initial historical conditions prevalent

in a country have a profound impact on the corporate governance practices that it is

likely to adopt. This argument helps us in understanding just why Asian firms and

institutions continue to be as they have been for centuries, despite the evident success

of western models of corporate ownership, structure and culture.

The presence of deeply entrenched path dependencies can inhibit a successful

transplant, if there are marked differences in the newly acquired code and the path

that the importing country has been on for many years.

1.6.2 Corporate Governance and Complementarity

Another important consideration to help make an imported model to work is to create

a fit of the new model with the prevalent institutions in the economy. One institution

or code of law, in isolation, cannot undertake the responsibility of corporate


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governance. Explaining the concept of complementarities Schmidt et al., (2000)

suggest that a well-integrated network of support institutions is needed to effectively

implement corporate governance practices. There have to be well-entrenched support

mechanisms at the regulatory level. The legal structure needs to be strong and

cohesive to the type of corporate governance that exists in the country. There needs to

be adequate support from well functioning stock exchanges. The objectives of the

minority and majority shareholders, employees, managers and boards of directors

need to be aligned with those of the regulatory authorities. Hence this

complementarity argument reinforces the point that what is efficient in one context

may not be efficient in another, especially if reforms are implemented on a piecemeal

basis (Coffee, 1999). Roe and Bebchuk (1999) view complementarity as not

something that concerns the ownership structure of firms for instance, it rather

considers other entities and institutions. Such institutions, practices, and professional

communities often develop in every country to facilitate the working of the national

corporate sector.

Hence, the whole national corporate governance system needs to be complementary.

Achieving this fit is not an easy task, especially in the less and newly developed

countries as well as the transition economies. Such transplanting countries, if they try

only to implement corporate governance models imported from developed nations,

may hurt their efficiency rather than benefiting from it, because of their lack of

support institutions.

1.6.3 Social and Corporate Culture

Culture is very deeply entrenched in business practices in Asia It plays a very

important role in whether a transplant would succeed or not. Roe (2003) suggests that

even the very basic corporate law characteristics could be a function not only of

finance, economic rationality and institutional capacity but also of cultural

background of the country where the law is being implemented. The national and/orregional culture of any country co-determines what people perceive as right or wrong,

what their attitudes are towards change, and the kind of behavioural patterns they

display. This in turn affects the way organizations and businesses are run. According

to Hofstede (1991) people carry within themselves patterns of thinking, feeling and

acting which they have acquired throughout their lifetimes. Once particular patterns


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are formed, the person would then need to unlearn them if she is to learn something

new. It is believed that unlearning to learn something new is far more difficult than

learning something for the first time. As suggested by Redding and Whitley (1990),

in a large proportion of Asian cultures firms are not thought of to be separate legal

entities distinct from their environment, they operate in the context of the society and

hence their form itself is shaped by the culture and the society of the country of

origin. Most of the Asian and some European economies follow what Branson (2000)

calls family capitalism. This term can be used to explain both, family controlled

publicly held companies as well as a family of companies that are highly networked

and work towards higher level of integration.

For a particular code, law or set or rules to be successfully imported, it is imperative

that it meshes well with the pre-existing rules and ownership structures (Pistor et al.,2003). Either that, or the cost of not changing to the newly transplanted system should

be substantially higher than the cost of maintaining status quo. There should be

motivation to adopt the transplanted code, and this can only come when the demand

for the transplant comes from within the importing country and its sub-systems

(Schmidt et al., 2002). The demand is necessary so that the law in the books will also

be used in practice. However it may never come off the books and practically used

unless it is adapted the local conditions (Pistor, 2001). Some countries may be more

receptive for a particular transplant because they share common legal history with the

origin, where as others may not understand the new transplant (or the new transplant

may be unsuited) and as with unsuccessful medical transplants, the recipient

corporations may actively develop antigens against the new body of law, rules or

codes. Therefore, before deciding what kind of regulatory framework to adopt, it is

crucial to look at it from the point of view of the people who will need to accept it and

would be finally using it.

1.7 Corporate Governance in PakistanThe literature regarding corporate governance in Pakistan is extremely thin, given the

lack of research culture in Pakistani academic and institutional spheres. International

literature, reviewed in the earlier subsections has focused on East Asian countries like

China, Thailand, Korea, and Japan to name a few. Among the South Asian countries,

there is relatively much more literature on India than any other country (Khanna et al.,


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1996, 1997, 1998, 1999; Pankaj, 1996; Goswami et al., 1996; Singh et al., 2000,

2002, 2003to name a few).

Cheema, Bari, and Siddique (2003) summarise the corporate growth history of

Pakistan, providing an overview of the ownership structures, state of financial market,

and market dynamics. Cheema et al. (2003) contribute to the sparse literature in

Pakistan by studying the various determinants of corporate structure in the same

pattern that important corporate governance studies (Claessens et al. 1999, LaPorta et

al. 1999) have. They show the concentration of ownership and control to determine

the ownership structure and capital market structure of Pakistan.

They point out that the recent financial reforms have made the financial sector in

Pakistan very risk averse, thereby limiting the amount of credit that is made available

to the corporate sector in Pakistan. The appendix of the paper outlines the legal

aspects of corporate governance in Pakistan by highlighting the areas where this Code

reinforces the current corporate laws and regulations, and where it overlaps them.

Cheema et al. (2003) further argue that in the current market structure and corporate

environment, many of the provisions of the Code of Corporate Governance (2002)

will not be as effective as they would have been in a more developed capital market.

The paper provides a good backdrop for further research by showing the ownership

structure in Pakistan and the macroeconomic environment with the perspective of

applicability of the Code of Corporate Governance (2002).


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Cheema et al. have highlighted the role of family ownership and their basic premise is

based on the theory of path dependence, suggesting that the historical progress of the

industry in Pakistan was one whereby family ownerships were promoted.

They show the high evidence of pyramiding in Pakistan in the absence of effective

capital market reforms.


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Their discussion suggests that concentrated control in Pakistan, which is buttressed by

interlocking directorships, cross-shareholdings and pyramid structures, may

strengthen incentives for excessive private benefit seeking.

Analysing the stock market in Pakistan, and the role of brokers therein, Khwaja et al.

(2004), find that brokers earn annual rates of return that are 50-90% higher than those

earned by outsiders, when they trade on their own behalf. They refer to price

manipulations by the brokers as a pump-and-dump phenomenon, i.e., when

prices are low, colluding brokers trade amongst themselves to artificially raise the

prices and attract positive-feedback traders.

Given the distinctive nature of each countrys culture, history, and institutions, as

Charkham (2000) points out. it would be impossible for one nation to copy

anothers arrangements in their entirety.


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2 Results and Discussion

2.1 Methodology

Given the dearth of literature in the area of corporate governance in Pakistan, it was

felt that meaningful contribution could be made with a study that is exploratory in

nature. This study, hence, focuses on the analytical examination of the implanted

Code of Corporate Governance and its fit with the country-specific dynamics of

Pakistan, using data provided by various sources that are detailed below.

The study explores various factors that may determine the implementation of good

governance practices in Pakistan. In order to substantiate the theoretical

underpinnings of the study, a combination of quantitative and qualitative approaches

have been used, depending on the nature of the factors being considered.

2.2 Overview of the Data

Compliance with the Code of Corporate Governance has been incorporated as one the

listing requirements for companies in Pakistan. Keeping in line with the objectives of

the study, data on stock market liquidity, ownership structure, and the regulatory

framework towards compliance with the Code was examined. Given the nature of this

study, it was important to identify the softer issues that may be at the core of the

Codes implementation strategy, along with supporting the argument with quantifiable

data. The data collected for purpose of this study is cross-sectional.

The qualitative information regarding the general response to the Code by listed

companies, problems faced in trying to implement the Code, and any shortcomings of

the Code, was obtained through interviews. Securities and Exchange Commission of

Pakistan (SECP) was the principal source for most of the data collected- both primary

as well as secondary. Secondary data included annual reports for companies that

constituted the sample of ownership pattern data, stock performance data for all of the

709 companies listed on the Karachi Stock Exchange as at year ending 2003, and

published reports, papers and newspaper articles on various aspects of corporate

governance in Pakistan.


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Data for the stock market liquidity is a census, where the population is 709 companies

listed on the Karachi Stock Exchange. This data was collected from the Karachi

Stock Exchange- 2004 diarys section titled Statement of Paid-Up Capital,

Dividend, High-Low & Turnover.

Data used to infer the ownership structure of listed companies in Pakistan was

obtained from the annual reports (year 2003) of a random sample of 30 companies

listed on the Karachi Stock Exchange.

2.3 Results & Discussion

The underlying premise of this thesis is that a good corporate governance framework

needs to be a system of regulations and best practices that enhances the efficiency of

the corporate sector, helps protect the stakeholders interests and gives rise to a

vibrant, healthy business culture. To be able to attain these objectives, it is imperative

that corporate governance systems mesh well with the existent corporate and

institutional systems playing upon the strengths of these systems and eradicating the

sources of weaknesses. Hence, to simply transplant a system of governance is not

enough. The requirement is to adopt the system to the peculiarities of a countrys

business environment.

As mentioned in the previous section, path dependence theory can help explain why

particular ownership structures of companies, development level of capital markets,

regulatory frameworks, and corporate cultures exist. In this section, we shall look at

the historical path that Pakistani corporate sector had taken to reach where it is today,

the impact this path dependence has had on the dynamics of Pakistans corporate

environment, culture and structure; and finally the implications this has on good

governance practices.

2.3.1 The Code of Corporate Governance

After a decade of impressive growth in the 80s and early 90s, Pakistan suffered

serious setbacks in the mid- to late 90s in terms of most economic and social

indicators. The economic growth rates decelerated, inflation rose to peak rates, debt

burden escalated substantially and Pakistan had to face international sanctions as a


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consequence of conducting nuclear testing in 1998. Pakistans economy was in dire

straights during the latter part of the 1990s when its GDP growth rate had consistently

declined each year, from 7.7% in 1991-1992 to a mere 1.7 % in 1997-1998 (Source:

ECO Official Website). The nuclear testing and subsequent freezing of foreign

currency accounts followed by international sanctions caused a drop in investor

confidence in the Pakistani market and led to a flight of capital away from Pakistan.

Table 5: South Asian GDP per Capita Growth Rate

Source: World Development Indicators 2002

Other macro factors like the military takeover of the government, the 9/11 tragedy, as

well as the War on Terrorism did little to bolster investors faith in Pakistan. In order

to address growth concern, and the evolving international standards regarding

monitoring and governance, the Securities and Exchange Commission of Pakistan

(SECP) introduced the Code of Corporate Governance in 2002, with the aim of

managing listed companies through the stock exchanges, in compliance with

international best practices. The Code was formulated by benchmarking several

international codes and corporate governance reports including the Code of Best

Practice of the Cadbury Committee on the Financial Aspects of Corporate

Governance published in December 1992 (U.K.), the Report of the Hampel

Committee in Corporate Governance published in January 1998 (U.K.), the

Recommendations of the Kings Report (South Africa), and the Principles of

Corporate Governance published by the Organisation for Economic Cooperation and

Development in 1999.


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The Code is a first step whereby principles of good governance are envisioned to be

systematically implemented in Pakistan. According to the project report published by

the SECP after the formulation of the Code:

The Code of Corporate Governance primarily aims to establish a system whereby acompany is directed and controlled by its directors in compliance with the best

practices enunciated by the Code so as to safeguard the interests of diversified

stakeholders. It proposes to restructure the composition of the board of directors in

order to introduce representation by minority shareholders and broad-based

representation by executive and non-executive directors. It seeks to achieve the

objectives of good corporate governance by recommending strengthening of

corporate working, internal control system and external audit requirements. The

Code emphasizes openness and transparency in corporate affairs and the decision-

making process and requires directors to discharge their fiduciary responsibilities in

the larger interest of all stakeholders in a transparent, informed, diligent, and timely

manner.

It has been two years since the Code of Corporate Governance was introduced by the

SECP as part of the listing requirements of the three stock exchanges in Pakistan,

namely Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE), and the

Islamabad Stock Exchange (ISE). Although the Code is very progressive in nature,

very little impact, if at all, has been felt by its adoption, because there still needs to be

a lot of work done to adaptthe Code to the specific needs of Pakistan.

Literature suggests that good governance comes when the interests of the stakeholders

are protected. According to the agency theory, a good corporate governance system

should be able to fundamentally limit the expropriation of minority shareholders at the

hands of block holders in instances of concentrated ownership, and/or reduce the

conflict of interest between the owners and managers in case of diffused ownership.

The role that a corporate governance system is required to play varies with the diverse

elements of a countrys financial systems as breadth and depth of the capital markets,

the pace of new security issues, corporate ownership structures, dividend policies etc.

(La Porta et al., 2000). Our data and the discussion that ensues, outlines the

importance of these elements in Pakistan.


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18

2.3.2 Liquidity of the Stock Market

The Karachi Stock Exchange (KSE) is the largest of the three stock exchanges in

Pakistan and an important emerging market of the region among the developing

countries. KSE is termed as high-risk high return market where investors seek high-

risk premium (Nishat, 1999).

Table 1 presents the frequency distribution of percentage turnover of shares during the

year 2002-2003 at the Karachi Stock Exchange. The frequency distribution consists of

14 categories, out of which 13 are classes with unequal class interval, while one is a

category denoting the number of companies whose shares have not been traded at all

throughout the year. The reason for not taking equal class intervals is that the purpose

of this table and dataset is to show the liquidity of KSE. With shorter class intervals

for the first few classes, it becomes clearer to display the limited level of trading

activity, and the large number of companies that fall into the lower trading brackets.

Table 1: Calculated from the Karachi Stock Exchange Annual Diary 2004

Out of 709 listed companies, only 638 companies traded, i.e., 10% of the listed

companies did not trade at all during the year. The number of shares traded during the

year for nearly 50% of the listed companies is less than 5% of the total number of

requency Distribution of % Turnover of Shares in KSE Listed Companies as at

year ended 2003

71 10.0 10.0 10.0

173 24.4 24.4 34.4

84 11.8 11.8 46.3

126 17.8 17.8 64.069 9.7 9.7 73.8

73 10.3 10.3 84.1

26 3.7 3.7 87.7

33 4.7 4.7 92.4

11 1.6 1.6 93.9

19 2.7 2.7 96.6

4 .6 .6 97.2

6 .8 .8 98.0

5 .7 .7 98.7

9 1.3 1.3 100.0

709 100.0 100.0

Not Trading

0%-2%

2%-5%

5%-15%15%-25%

25%-50%

50%-75%

75%-125%

125%-200%

200%-300%

300%-500%

500%-600%

600%-800%

800%+

Total

ValidFrequency Percent Valid Percent

Cumulative

Percent


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19

outstanding shares. And the only about 15% of companies display a turnover of 50%

or more of their outstanding equity. The data shows the limited liquidity of companies

trading on the stock exchange. It shows that a majority of the companies do not rely

on stock exchanges to raise capital. On the other hand during the year 2003, KSE

index touched its then highest ever mark of 4604 points on September 12. Given the

extremely low equity turnovers for a majority of companies on the KSE, the

movement in the KSE 100 index may have been displaying the level of trading and

market price changes in a small number of listed companies, rather than representing

the market as a whole. The lack of liquidity limits the exit options for current

investors and minority shareholders, raising their risks. Khwaja et al. (2004), show

that the Karachi Stock Exchange is a market that despite being small in size has a high

turnover, a phenomenon that they claim to be very common occurrence amongst

emerging stock markets. A high overall turnover is attributed to manipulations by the

brokers as well as information asymmetry and insider trading. In their study, in 2002,

the top 25 stocks accounted for 75% of the overall market capitalization, and 85% of

total turnover, with the top 5 most traded shares comprising of 68% of the turnover.

Khwaja et al (2004) findings complement our findings and argument that the KSE is a

market that is directed by the small number of stocks. The London Stock Exchanges

(LSE) top 5 shares on the other hand, accounted for only about 24% of the total

turnover.

One of the reasons that companies do not actively trade in the stock exchanges in

some Asian countries is because they have alternative modes of raising capital

(Khanna et al., 1999). The ownership structure of companies enables them to tap

internal sources of financing, or financial credit rather than raising capital at the stock

exchanges. The closely related underlying social process is that people prefer to do

business with their friends and family members in Pakistan. Hence, inter-corporate

financing is a popular option that many companies exercise, especially those

belonging to business groups.

Historically too, during the 1960s industrialization in Pakistan, big industrial groups

were provided with cheap industrial credit, on lenient termsthe practice has been

going on since then until recently, as each new policy trying to stimulate industrial


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20

growth and productivity has done so by providing financial incentives in one form or

the other. The mode of raising capital is predominantly through financial credit.

However, there is no restriction in Pakistan of banks investing in equity; hence there

is a conflict because banks are also the lenders and hold about 12% of equity in the

manufacturing sector of Pakistan (Mahmood et al. 2003).

With little motivation for companies to raise capital from the stock exchanges, there is

a danger of companies wanting to de-list if they perceive complying with the Code as

too expensive. An Impact Assessment of the Code of Corporate Governance Report,

found that many small companies and subsidiaries of larger companies have

expressed their reservations about the publications of quarterly results. They consider

the exercise as too costly and negatively affecting their productivity. According to the

report, additional cost burden of complying with the Code of Corporate Governance is

in the range of Rs. 0.8-1.2 million, for small companies. In the year 2002-2003 four

companies de-listed from the stock exchange citing the cost of compliance with the

Corporate Governance Code as being too high for it to remain feasible for them to

stay listed. In an economy where capital markets need to develop, such a reaction by

companies may be counter productive.

2.3.3 Ownership Structure of CompaniesThe anglo-saxon model of corporate governance, adopted by Pakistan lays emphasis

on the protection of shareholders in order to limit the agency costs, and ensure the

protection of owners interests. The model inherently assumes diluted shareholding

and intensive institutional investment (Jensen et al., 1976). Ownership structure of

companies plays an integral role in the implementation process of regulations, such as

those that the corporate governance code prescribes.

In order see the level of dilution versus concentration of equity ownership in the listed

companies, a sample of 30 companies was chosen from 709 companies listed on the

KSE.

The annual reports for the year 2003 were used to collect information regarding the

shareholding patterns of each of the 30 companies in the sample. Securities and


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21

Exchange Commission of Pakistans (SECP) reporting requirements require the

annual records to have a Pattern of Shareholding for the year, which tabulates the

number of shareholders, the class/category of number of shares held, and finally total

number of shares held.

The data for each company was split into the 2 categories: top 5 shareholding classes

and bottom 5 shareholding classes. In some instances where there werent 5 classes in

either category, then less than 5 classes were taken. The total percentage of

shareholding for top 5 and bottom 5 shareholding categories was calculated

respectively.

The average number of individuals falling in the category of smallest 5 shareholdings

is 5352.533 holding an average of 8.76% of the total equity in the sample. Whereas on

average 5.033 individuals held shares that fall in the largest 5 shareholding category

and hold about 64.6% of the shares, according the sample of 30 companies.

To draw inferences about the statistical population based on information obtained

from the sample dataset, the z-test was chosen as the testing method. Z, a standard

normal variable, is used to test for the sample mean.

(a) Largest 5 (or less) Shareholding Categories:

It is intuitively known that the Pakistani stock market faces the problem of

concentration of shareholding. In order to statistically determine whether the

ownership of shareholder is concentrated, the shareholding categories were studied. It

is hypothesized that ownership is would be considered concentrated if more than 50%

shares were held by individuals within the top 5 shareholding categories. 50% is taken

as a cut off point because it would suggest that the 5 top shareholding alone accountsfor the 50% of share ownership, leaving the other 50% to fall into the 95%

shareholding bracket, and hence is a good measure of concentration. If we look at this

information from the perspective of how many individuals actually own the shares

that fall in the top 5 holding we would be able to see how many shares each individual

in the this category holds on average.


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22

Hence the hypothesis for this category is:

Ho: Largest 5 shareholding categories account for 50% or less shareholding

H1: Largest 5 shareholding categories account for more than 50% shareholding

Testing the hypothesis, we find that on a 95% confidence level for a one-tailed test,

the null hypothesis can be rejected, and we can conclude that the largest 5

shareholding categories do indeed account for more that 50% of shares. To establish

the fact that there is presence of block holding, we look at the average number of

individuals with holdings in these top 5 categories. As can be seen in Table-2, the

average number of shareholders controlling more than 50% of the shares is almost 5,

this means that each shareholder on average hold almost 10% of the total outstanding

shares in the company. The data from annual reports suggests that the block holders in

companies are mostly other privately held companies, international parent companies

in case of multinationals, financial institutions and in some cases individual persons.

(b) Smallest 5 (or less) Shareholding Categories:

Following the same methodology as the large shareholding category, the cut-off rate

to see the level of dilution at the bottom 5 of shareholding is taken to be 15%. It is

hypothesized that the ownership would be considered diluted if the shareholders of

the bottom 5 categories held more than 15% of total shares in the company. Again

Table 2: Daignostic statistics for largest 5 (or less) shareholdings

Sample size 30

Sample Average 64.59739

Sample Sd 24.77173

Average No. of Shareholders 5.03333

Z test

Ho Population average of shareholding by largest five (or less) shareholders


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23

15% is taken as an arbitrary number, as 3% or less shareholding in each category on

average would show limited dilution. If the shareholding in the first 5 categories is not

more than 15% then it shows that the concentration may be found in the larger

categories, hence suggesting block holding. It would be more meaningful to look at

the average number of individuals whose share ownership falls in the smallest-5

shareholding category.

Hence the hypothesis for this category is:

Ho: Smallest 5 shareholding categories account for 15% or more shareholding

H1: Smallest 5 shareholding categories account for less than 15% shareholding

As for the large shareholding category, we calculated the z-statistic for the small

shareholding category too, and on a 95% confidence-level one tailed test, rejected the

null hypothesis in favour of our alternative hypothesis. Thereby we infer that the

shareholders among the bottom five categories of shareholdings own and control less

than 15% of the total shares. The presence of extremely limited dilution can be further

noticed when we check the average number of shareholders that do actually fall in this

category. As seen in Table 3, above there are approximately 5352 shareholders

owning less than 15% of the outstanding shares, this means that each shareholder in

this category holds about 0.0028% shares in the company.

Table 3: Diagnostic statistics for smallest 5 (or less) shareholdings

Sample Size 30

Sample Mean 8.709707

Sample SD 9.598529

Average No. of Shareholders 5352.533

Z Test

Ho Population average of shareholding by smallest five (or less) shareholders > 15%

Critical Value -1.64

Test Value -3.589441

Test result : Null hypothesis is rejected in favour of H 1 and we conclude that the smallest 5% (or less)of the shareholders hold less than 15% of the sharecapital in the company


27/39


24

Amalgamating our findings from both the categories it can be safely said that the

majority ownership of shares is in the hand of few shareholders and results in

intensive block holding. This result is consistent with international studies that report

high levels of ownership concentration in companies in Asia (La Porta et al., 1998,

2000; Claessens et al., 1999; Thadden et al., 1999).

One of the factors to be considered when doing quantitative studies as shown above,

is the relative impact that companies have on the capital markets. For instance, a

larger company that is has diluted shareholding may neutralise the effect of 4 smaller

companies with concentrated shareholding, when seen in the context of the stock

market as a whole. Following this line of thinking, it was worthwhile to see if there is

a difference in the sample averages when market capitalization is taken as the

determinant for firm size, and hence the sample is weighted on it.

Table 4, shows that when we use the weighted averages the sample mean for largest

shareholding categories goes higher, from 64.6% to 71.17% while the shareholding

average % for smallest category goes down from 8.71% to 5.67%. This suggests that

the weight of the larger companiespulls the percentage shareholding more in favour

of concentration. The dilution of share ownership in the smaller firms is not high

enough to neutralize the effect of higher concentration in larger firms, hence

suggesting an even higher concentration of shares with a few individuals than the data

initially suggested.

Table 4: Comparison of Simple Sample Means and Weighted Sample Means for

Largest and Smallest 5(or less)shareholding categories

Sample Mean of 5 (or less)

Largest Shareholding

Categories

Weighted Sample Mean of

5 (or less) Largest

Shareholding categories

Sample Mean of 5 (or

less) Smallest

Shareholding Categories

Weighted Sample Mean of 5

(or less) Largest Shareholding

categories

64.60% 71.17% 8.71% 5.67%


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25

The Code of Corporate Governance, which focuses on solving the corporate

governance issues for shareholders, assumes dilution of ownership. In Asia however,

the dilution is extremely limited. Another thing that this data has not accounted for is

proxy ownership. There may be individuals owning shares of the companies in their

own name, but acting as proxies for the majority shareholders. If that is the case then

the dejure concentration of shareholder is far more than can be seen from the data.

The concentration of ownership in Pakistan can be attributed to the underdevelopment

of institutions and capital markets. Firms need to have highly complex (formal and/or

informal) relationships with one another, to make up for the lack of exogenous

institutional support. Family ownership facilitates transactions, thus minimising

transaction costs. On the other hand with pyramiding and cross-shareholdings, the

controlling shareholders can get higher rents, than they would if they paid out

dividends.

Another phenomenon observed in the sample annual reports was that the largest 5

shareholders were corporate entities or financial institutions. Hasan (1997) argues that

there has been a trend since the 1960s whereby the family members of big business

groups in Pakistan have political clout, and hence acquired positions on the boards of

different financial institutions that were formed to fulfil the financial requirements ofthe private sector. This led to an overlap of interests demonstrated in credit raised

from sources like the National Investment Trust (NIT) resources and its extension to

the business houses. For example, in the 1970s Ahmad Dawood played a dual role as

the director of NIT and as an equity owner in the Dawood group investments. Such a

path dependency in Pakistan shows that the concentration of ownership structure is

not limited to the firm itself, it extends to other institutions like financial institutions

as well.

There is little motivation for the traditional big family-owned companies to raise

capital from the stock exchange. They skip dividend payments year after year; on the

pretext of ploughing back the profits into the business. The public money raised at the

stock exchange is tunnelledto associated holdings of the public company. Due to the

opaqueness of the family-owned system, and block holding, it becomes very hard to


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26

ascertain where this money was utilized. To be able to maintain a position of control

via concentrated ownership, family controllers in Pakistan seldom trade company

shares. They have much more to gain by retaining opaqueness and control, than to

raise more capital by allowing ownership dilution.

Interviews with the SECP officials suggested that most of the companies were in fact

complying with the Code. Compliance with the Code in itself does not mean that the

ownership structures of the firm would change, and unless these structures change, the

Code will have little impact on the economy. This is because the Code draws on the

Anglo-Saxon model of corporate governance, with its thrust on protecting the

minority shareholders, in order to ensure efficiency in the company. In Pakistan as the

data presented in this section shows, the percentage of minority shareholders is too

low to ensure productivity in the firm, even if their interests are protected. It is

imperative, as claimed by the complementarity arguments (Schmidt et al., 2000;

Coffee 1999) that the Codes objectives and the means of achieving those objectives

match the structural set up of at least the listed companies.

2.3.4 Corporate Culture

Bringing about changes in a culture is a very slow process. However, foreign

companies and institutional investors tend to bring about change faster than localentities. Unfortunately, foreign investors shy away from Pakistan, due to its socio-

political volatility, economic instability, and poor governance within the

organisations. This means that Pakistan is caught in a Catch-22, whereby deep

meaningful cultural changes that pave way for good corporate practices can result

from the presence of international investors; and on the other hand international

investors would choose to invest in Pakistan only when the governance of its

economy improves.

It is highly unlikely that the rules and business institutions that reformers wish to

incorporate for better governance, would work unless they match the politics of the

country. As Roe (2003) espouses, if the institutions in a country dont mesh well with

the underlying political foundations, reformers need to understand that fixing the


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27

institutions mechanics to complement the political foundations will be an uphill

climb.

Culture may change as corporate structures change, however if a particular set of

cultural traits is too deeply embedded in the society, that it fits many institutions, then

it will not change if it is impeding the objectives of one institution (Roe, 2002). In

Pakistan, a change in cultural traits cannot occur if the regulatory institutions desire

the change only.

With the ownership of financial instruments being concentrated, the number of traders

in the market is smaller for these instruments making them less liquid, which in turn

reduces the exit option of the small shareholder. Understanding this phenomenon,

investors in Pakistan do not enter these markets as frequently as they would enter a

more developed instruments market. Khwaja et al (2004) clearly point out that in

terms of direct costs the price manipulation done by insiders i.e. the brokers when

acting for themselves would discourage investors to invest in the stock market.

Corporate governance code in isolation, hence, can achieve little until and unless

reforms are extended to complementarity institutions, the stock markets being one of

the most important. From policy perspective the goal of Corporate Governance

reforms should not be to emulate the Anglo-Saxon model of good governance. Theregulators should not try to force a change in ownership structures; instead they

should facilitate efficient use of capital. Co-ordinating simultaneous change in

multiple institutions is almost impossible. Policymakers need to emphasise on

medium- to long-term planning, and more importantly phased-implementation of

these plans. Scope of further research exists in identifying the motivators for firms

and corporate sector that may bring about a voluntary change and acceptance of good

governance.

3 Conclusion

The belief that corporations need to be governed in order to mitigate the agency

problem that arises between owners and managers due to information asymmetries

and incomplete contracts-- the Berle and Means widely held companywas until


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28

quite recently, very popular between academic, institutional, regulatory and policy-

making circles. However, there is increasing evidence suggesting in developing and

transition economiesand even some developed economiesall over the world

display ownership structures that do not adhere to the Berle and Means image of a

corporation. Studies that look outside the US, particularly into those countries with

weak shareholder protection, find that even the largest companies have concentrated

shareholding patterns, and thus face a different kind of agency problem. La Porta et

al. (1998) discover that the agency problem in large corporations all around the world

entails restricting expropriation of minority shareholders by the controlling

shareholders, rather than that of restricting empire building by professional managers

accountable to shareholders.

The results of our study reinforce the point that agency problems differ according tothe economic conditions, ownership structures, capital market development, cultural

underpinnings and institutional capacity. The empirical question that this study poses

is whether or not an Anglo-Saxon corporate governance model that is formulated in a

particular corporate context, be applicable to a country like Pakistan that displays very

different business and socio-economic characteristics. Given the multitude factors, the

interactions of which forms the corporate framework of any country, the study was

not expected to give any straightforward answers. This thesis was expected to explore

the factors that may potentially impede an effective implementation of good

governance in Pakistan.

Based on the findings of this study we postulate that before abstract notions of

corporate governance are imposed by the regulatory forces in Pakistan, it is

imperative that the policy makers understand the dynamics of decision-making, loci

of power, the various market inefficiencies and their costs, the social embeddedness

of existing governance mechanisms, and above all the role played by various

organizational forms and boards in the country's development are understood. If theSECP and stock exchanges try to adopt good governance practices by forcing them on

the corporate sector of Pakistan, it is our premise that, such a move would be

extremely counter productive to the economy as a whole. We, therefore, strongly

recommend that the Code of Corporate Governance by implemented through an

iterative process that is phased out over a long-term period. One of the essential


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29

features of this phased implementation should be the focus on developing other

support institutions simultaneously. Any amount of corporate governance reform

cannot work in isolation due to the very nature of good governance. Creating a snug

fit between the on-paper policies and de facto implementation can ensure effective

governance of the corporations. To achieve this fit, policy-makers need to be

appreciative of the uniqueness of the corporate culture of Pakistan and incorporate it

in any structural or market reforms that entail good governance.

There is a dire need for further research in Pakistan on not only corporate governance,

but also in the peripheral areas of ownership structures, and key market forces that

impact the dynamics of companies and institutions. These forces need to be identified

and understood before they can be used to benefit the economy. This warrants

empirical time-series based research on the performance of firms to study increases inproductivity, if any, which may have resulted from the introduction of the Code of

Corporate Governance. It would also be interesting to see the role of institutional

investors, both national and international, in bringing about good governance

practices in Pakistan. Exploring these further research areas is extremely important for

making sensible policy recommendations. For the time being though, it is safe to

conclude by saying that adopting an international code of corporate governance

without adapting it to local needs and requirements, will not have the positive impact

that is hoped to be brought to the corporate sector through this Code.


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Corporate Governance in Pakistan

A.3 Turnover and capital account details of recently listed firms (example set)*

S. No Name of CompanyYear ofl isting Year ending

Paid up Capital

2003 (Million ofRupees)

Par value ofShares

No of

OutstandingShares

Turnover ofShares 2003

% Turonver ofShares 2003

A B (B/A)*100

1 D.G. Khan Cement (R.C Perf.) 10% 2003 September 353508000 10 35350800 9205500 26.04

2 Mashreq Bank Pakistan 2003 December 1475613000 10 147561300 82028000 55.59

3 Nagina Cotton Mills (R.C.Pref) 13% 2003 September 241860000 10 24186000 1140500 4.72

4 Security Leasing Corp. (Pref) 9.1% 2003 June 150000000 10 15000000 NT -

5 TRG Pakistan "A" 2003 June 600000000 10 60000000 505203000 842.01

6 TRG Pakistan "B" 2003 June 120000000 - - NT -

7 Attock Cement Pakistan Limited 2002 June 721629000 10 72162900 196826500 272.75

8 Bosicor Pakistan Limited 2002 June 1750466000 10 175046600 1503450000 858.89

9 National Bank of Pakistan 2002 December 4 103422000 10 410342200 1567153500 381.91

10 Natover Lease & Refinance (Pref) l5% 2002 June 150000000 10 15000000 11903500 79.36

11 WorldCALL Multimedia Limited 2002 June 530000000 10 53000000 105500 0.20

12 Arif Habib Securities Limited 2001 June 79998000 10 7999800 425500 5.32

13 Bestway Cement Limited 2001 June 1934696000 10 193469600 1295500 0.67

14 Fayzan Manufacturing Modaraba 2001 December 9 00000000 10 90000000 4116000 4.57

15 Pakistan PTA Limited 2001 December 15142072000 10 1514207200 1492391500 98.56

16 Dewan Farooque Motors Limited 2000 June 734031000 10 73403100 921239500 1255.04

17 Meezan Bank Limited 2000 December 993212000 10 99321200 11001500 11.08

18 WorldCALL Communications Ltd. 2000 June 1592643000 10 159264300 694635500 436.15

19 Altern Energy Limited 1998 June 221000000 10 22100000 451500 2.0420 Rafhan Bestfoods Limited 1998 December 61576000 10 6157600 800 0.01

21 Refrigerators Manufacturing Co. 1998 December 50023000 10 5002300 4693100 93.82

22 Clairant Pakistan Limited 1997 December 155969000 10 15596900 423200 2.71

23 Grays Leasing Company 1997 June 180000000 10 18000000 206000 1.14

24 Nina Industries Limited 1997 June 242000000 10 24200000 692500 2.86

25 Saadi Cement Limited 1997 June 1850000000 10 185000000 34902000 18.87

26 Sigma Leasing Corporation Limited 1997 June 200000000 10 20000000 NT -

27 Al Khair Gadoon Limited 1996 June 100000000 10 10000000 2697500 26.98

28 Al Meezan Mutual Fund Limited 1996 June 775000000 10 77500000 12714000 16.41

29 Askari General Insurance Co. Ltd. 1996 December 81747000 10 8174700 16897000 206.70

30 BSJS Balance Fund Limited 1996 June 374000000 10 37400000 15470000 41.36

*Note: The above table is an abridged version of dataset used (comprising of 709 firms) and is for

illustration purposes only.

cg in pakistan- adopt or adapt

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