Lahore School of Economics

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Managing Business in Pakistan-Challenges and Opportunities

Lahore School of Economics Second Annual Business Research Conference concluded on May 31, 2104. The Conference was held at the Lahore School Main Campus in collaboration with CFA Society Pakistan, The Institute of Chartered Accountants of Pakistan, JCR-VIS, PACRA and MAP. The theme of the Conference was “Managing Business in Pakistan-Challenges and Opportunities."


On May 30, 2014, the Conference was inaugurated by Dr Shahid Amjad Chaudhry, Rector, Lahore School of Economics, who welcomed all the speakers and guests. Dr. Amjad Waheed, CFA (CEO NAFA Funds) delivered the key note address with a special focus on the investment alternatives in Pakistan based on the historical performance and future outlook. Dr. Waheed recommended the use of Modern Portfolio Theory and strategic asset allocation process to investment decisions. According to him, this process is based on a three dimensional view of the risk, return and correlation between asset classes. He asserted that the investors should resort to the Capital Protected Strategy if they aim to protect their return against inflation and earn a decent return and substantiated it with attained results.



The first session of the Conference was geared towards gaining insights on the Capital markets, Investment Opportunities and Valuation practices in Pakistan. This session was chaired by Mr. Akif Saeed, Executive Director, Securities and Exchange Commission of Pakistan. Mr. Akif Saeed is associated with Securities and Exchange Commission of Pakistan (SECP) for the last 8 years. Presently he is heading Strategy, Development and External Relation Department; prior to this he was heading Securities Market Division and Specialized Companies Division. Mr. Ashraf Bava, CFA, CEO Nael Capital, President CFA Society Pakistan, opened the discussion with a focus on the rights of the investors. He asserted that the protection of the rights of investors is the foremost duty of the financial professionals not only in terms of the services they provide but also the kind of products they offer. He stressed the fact that it is in the best interests of the investor to know what their rights are before making an investment as this reduces the asymmetry of information. Dr. Bava emphasized that these rights apply to all countries. This discussion was aptly taken forward by Dr Nawazish Miza, Associate Professor of Finance at Lahore School of Economics. Dr. Mirza presented his findings regarding the performance of sell side analysts based on their one year forward target price over a period of five years. He revealed that the use of Capital Asset Pricing Model (CAPM) mispriced the cost of equity and resulted in an optimistic target price. Therefore, it should be replaced by the multifactor asset pricing model which improved the forecasts. He recommended the use of such models in economies like Pakistan where stock markets are subject to volatility clustering and high order moments.


The second session of the Conference focused attention on the Financial Institutions, Instruments and Relevance of Credit Rating for a Vibrant Financial System. This session was chaired by Mr. Javed Masud, Board Member, Pakistan Petroleum Limited, Advisor and Visiting Fellow Center for Public Policy and Governance, FC College, Former Managing Director PACRA. The session was taken forward by Shahzad Saleem, CFA, Chief Operating Officer PACRA. Mr. Saleem emphasized the reliability of the rating agencies and the probability of them going wrong. He made a special mention to the 2007 crisis whereby the inability of the rating agencies resulted in magnifying certain risks. However, as asserted by Mr. Saleem, the situation has changed now and regulators have developed a comprehensive code of conduct for the rating agencies. Increasingly, the investors have also decreased their sole reliance on the rating agencies to make the final decision. Concluding his presentation he stressed the fact that the opinions of the rating agencies are knowledgeable tools, however, this information is based on a relative measure rather than on standalone basis.


The discussion was carried on by Dr. Bushra Naqvi, Assistant Professor at Suleman Dawood School of Business, LUMS. Dr. Naqvi emphasized the importance of municipal bond financing which is an untapped financing source for infrastructural projects in Pakistan. Dr. Naqvi asserted that in a country like Pakistan, where there is an ever increasing need for financing the urban infrastructure projects which are accelerated by the presence of the different tiers of governments, municipal bond financing can prove to be a viable option. This recommendation was based on the performance of municipal bonds relative to the neighboring countries. However, as noted by Dr. Naqvi, there are hurdles in the way of a developed municipal bond market; problems that can be resolved. Sobia Maqbool, CFA, Group Head JCR VIS Rating Company Limited, took the discussion to an alternate dimension. She focused on the ratings in Islamic Finance and asserted that Islamic Finance has been growing as an alternate mode of financing as against the conventional mode. It is fundamentally different from the conventional mode of financing. However, there is a need for the development of a separate rating methodology for Islamic Financing as the current rating methodology does not fit this mode. Therefore, JCR VIS has launched such a system to overcome this deficiency. Another paper on the somewhat same lines was presented by Birjees Rahat, a candidate of MBA Banking and Finance at Lahore School of Economics. She emphasized the role of credit rating agencies in creating valuable information for the market investors. These rating agencies have access to non-public information and therefore are in a better position to disseminate reliable information to investors. The research paper revealed that there is a positive link between ratings upgrade and positive abnormal returns.


The last session of the Conference highlighted the key issue of Corporate Governance, Financial Reporting and Taxation Practices. This session was chaired by Mr. Naeem A Sheikh, FCA President ICAP. Mr. Naeem has been serving in the Council for the last 4 years and was the Vice President North in 2012-13. He was also a member of the Northern Regional Committee twice from 1993 to 2001.This session was opened by Mr. Jaffar Hussain, FCA, whose presentation focused on financial reporting and modern business. Mr. Hussain focused on the importance of effective financial reporting for both the managers and the external parties. He asserted that the failure of effective financial reporting and lack of accountability led to the failure of Enron after which a need to develop uniform accounting practice was greatly felt. The development and adoption of IFRS and ISA enabled the managers to make better informed and quality decisions. Dr. Hussain stressed the fact that without transparent and reliable financial reporting achieving good governance may not be possible.


Mr. Arshad Hasan, CFO and Assistant Professor at Lahore School of Economics and Dr. Doaa Aly, Senior Lecturer in Accounting at the University of Gloucestershire presented a paper on the same lines. They emphasized that the biggest medium of communication between a firm and capital market participants were the financial statements and the investors needed to believe in the quality of accuracy of these reports. They tried to establish a cause and effect relationship between corporate governance and quality of financial reporting whereby the former was the treated as the cause. Abdul Rahim Suriya, FCA, FCMA, explained the issue of corporate governance in greater detail and took the discussion forward.


Concluding the session, Mr. Abdul Rafay, FCA and Mobeen Ajmal, lecturer at School of Business and Economics at University of Management and Technology presented on the earnings management through deferred taxes and its compliance under IFRS. The research emphasized the fact that Pakistan is one of the pioneer implementers of IFRS which bounds the Pakistani companies to disclose their deferred tax and has resulted in the provision of relevant information to equity investors. 


On May 31, 2014, the Conference started with the key note address of Ms. Saadia Naveed on “the importance of knowledge and self development for Career Service”. Ms. Saadia Naveed is the President Management Association of Pakistan and Deputy Managing Director, English Biscuit Manufacturers. She is a founding member of EFS. After completing her Articles with A.F. Fergusons & Co. in December 1991, she got associated with EBM. She is a Chartered Accountant by profession.



The theme of the first session was Entrepreneurship and Innovation in Pakistan, which is of utmost importance for the development of the Pakistan economy. This session was chaired by Ms. Saadia Naveed. Dr. Muhammad Sheharyar Shahid, Assistant Professor Entrepreneurship Suleman Dawood School of Business LUMS and a leading member of the Entrepreneurship Working Group at the university, opened the discussion by presenting his paper. Dr. Sheharyar discussed the factors that affected the formalization of the informal entrepreneur sector in Pakistan. He asserted that lower levels of formalization were almost always correlated with younger and less educated entrepreneurs who are concerned about public sector corruption, high taxes and have resentment towards the government. He concluded that the formal and the informal sectors of Paksitan should be treated and identified differently and efforts should be made to formalize the informal sector.


Dr. Rizwan Ahmed, Assistant Professor in the Faculty of Business Administration at Lahore School of Economics, took the discussion forward by discussing the positive impact of e-commerce on entrepreneurship and employment in the country. He asserted that despite the favorable growth in internet and mobile demographics, Pakistan’s e-commerce market size remains small. According to him, this potential growth was being hindered by the absence of institutions and trade bodies to support and promote ecommerce, lack of applied and market research, lack of capacity building and training in ecommerce, and absence of e-payment gateways. He concluded by stressing the fact that the government should develop such a policy to enhance the growth of e-commerce and implement it successfully. Dr. Abdul Waheed, Assistant Professor Business School of the University of Central Punjab, presented a paper on the same lines. He tried to establish a link between the product/process innovation and the productivity of workers. The results of his research revealed that although there was a significant positive relationship between both the variables, Pakistani firms relied more on traditional productivity factors, labor and capital rather than innovation, for productivity enhancement.


The second session of the day was largely focused on Strategy, HR and Leadership in Pakistani Companies. The session was chaired by Dr. Wendelien Van Eerde, Associate Professor and thesis coordinator at the University of Amsterdam Business School. Mr. Muhammad Shakeel Sadiq Jajja, Assistant Professor Suleman Dawood School of Business, LUMS, opened the discussion by discussing the impact of the supplier’s organizational culture on his social compliance. He asserted that despite pressures, varying from normative to coercive forms, from the buyers, competitors and regulators, the suppliers organizational culture had a positive impact on the social compliance which moderated all the pressures.


This discussion was aptly taken forward by Dr Wendelien Van Eerde, Associate Professor at University of Amsterdam, Business School. Dr. Eerde emphasized the different uses of time by people coming from different cultures and backgrounds. She asserted that Pakistanis had a wider window of time, which essentially means that the early or late arrival of another person is acceptable to them. The higher the societal role, the later a person can arrive. However, when compared to their Dutch counterparts, the result is somewhat opposite. It is acceptable for Dutch if a friend arrives late for an appointment but they do not distinguish between the roles of the other scenarios.


Dr. Zahid Riaz, Assistant Professor, Faculty of Business Administration, Lahore School of Economics, took the discussion forward. He tried to establish a relationship between corporate governance aspects and firm performance of Karachi Stock Exchange (KSE) 100 index firms. Various factors were analyzed by focusing the agency theory and the resource dependency theory. He revealed that there was positive relationship between corporate governance and the performance of firms on KSE 100. Therefore, he concluded that keeping in view all the issues, policies should be developed by policy makers by engaging the business leaders. The last speaker for this session was Mr. Imran Hameed, Assistant professor of human resource management, Management and Organziation, UCP Business School. He tried to explain the impact of organizational tenure on the relationships between two status evaluations, that is, perceived external prestige and perceived internal respect, and organizational identification. He stressed the importance of organizational identification in the development of employee’s readiness for change.


The last session of the Conference focused on the Operations, Supply Chain and Marketing. The session was chaired by Dr. Sohail Zafar, Dean of the Business Administration Faculty at the Lahore School of Economics. The first presenter of the session was Dr. Amir Khan, Associate Professor of Marketing and Organizational Behavior and Associate Dean, Executive Education, at the Lahore School of Economics. Dr. Khan argued that while market orientation lead to firm performance in product context, it did not lead to service context effectively. He suggested that it is customer value orientation that leads to firm performance in the service context. However, managers should focus on using a mix of both these strategies.


The session moved on with a presentation of a case study by Ms. Tania Hasan, visiting Faculty, Business department, Lahore School of Economics. The case study was focused on a clear and distinctive marketing strategy. Ms. Hasan asserted that it was really important for firms to have a clear positioning and differentiation strategy which should not be made in isolation but should be a result of a market research. She asserted that it is a difficult task creating a need for a relatively new product such as Organic Food of which few customers have knowledge about. Therefore, it is critical for firms to identify the potential target market and segment and then develop the critical activities to build and sustain the competitive advantage. The next speaker of the session was Ms. Shamila Nabi Khan, Lecturer and PhD scholar, Lahore School of Economics. She tried to establish a link between strong management leadership and competitive strategies including manufacturing strategy and firm performance. She revealed that there was a strong relationship between the two variables thereby the impact of pursuing cost leadership or differentiation would largely be based on the flexibility of management.


The last speaker for the day was Mr. Farrukh Iqbal, Assistant Professor, Division of Information & Operations Management-UCP Business School. Mr. Iqbal emphasized that customer satisfaction was the name of the game and the ultimate goal for any organization. However, according to him, it was not just the quality of product or service that induces customer satisfaction but a host of attributes that together form and bind customer satisfaction. He explained these factors with the use of a QFD matrix.


On the whole, it was an informative Conference with speakers from diverse backgrounds, expertise and fields presenting their views, expressing their concerns and proposing solutions. It was an interactive and discussion oriented Conference that shed light on important matters. The concluding remarks by all the session chairs reflected their appreciation for the work done by Lahore School of Economics. They expressed their deepest gratitude for being a part of such a Conference and hoped that this would continue in the future too.

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posted by S A J Shirazi @ 6/02/2014 09:07:00 AM,

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