JOURNALOF SOCIAL SCIENCESAND HUMANITIES

JOURNALOF

SOCIAL

SCIENCESAND

HUMANITIES VOLUME 26 NUMBER 1 SPRING 2018

Editor

Prof. Dr. Samina Awan

Assistant Editors

Fozia Umar

Mehmood ul Hassan

FACULTY OF SOCIAL SCIENCES AND HUMANITIES

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD, PAKISTAN

Published by Faculty of Social Sciences and Humanities

Allama Iqbal Open University

Islamabad, Pakistan

Spring 2018

© Journal of Social Sciences and Humanities 2018

All rights reserved. No part of this journal may be reproduced with any form or by

any electronic or mechanical means including information storage and retrieval

systems without prior permission in writing from the Editor, JSSH.

“Y” Category by HEC

ISSN 1994-7046

Cover design by Hameed Zahid

Layout by Muhammad Javed

Printed and bound by AIOU-Printing Press, Islamabad, Pakistan

EDITORIAL BOARD

Editor Prof. Dr. Samina Awan

Chairperson, Department of History/Dean Faculty of Social

Sciences & Humanities, AIOU

Assistant Editors Fozia Umar

Lecturer, Department of History, AIOU

Mehmood ul Hassan

Lecturer, Department of Business Administration, AIOU

Advisory Board Prof. Dr. David J. Corner

Advisor to the Principal, University of St. Andrews, College Gate

North Street, St. Andrews, Fite, KY16 9AJ, Scotland, UK

Prof. Dr. Mushtaq A. Sajid

Dean, Faculty of Management Sciences, University of

Management Science and Information Technology, Kotli (AJK)

Prof. Dr. Mughees Ud did Sheikh

Dean of School of Media and Communication Studies,

University of Central Punjab, Lahore

Prof. Dr. Robert Nichols

The Richard Stockton College of NJ, USA

Prof. Dr. Rafique Afzal

Department of History, Quaid-i-Azam University, Islamabad,

Pakistan

Prof. Dr. Gita Dharampal-Frick

Director, South Asian Institute University of Heidelberg

Im Neuenhemer Feld 330, D-69120

Heidelberg, Germany

Prof. Dr. Samina Amin Qadir

Vice Chancellor, Fatima Jinnah Women University, Rawalpindi,

Pakistan

Dr. Usman Ghani

Joint Director

Institute of Management Sciences

Peshawar, Pakistan

Yahya R. Kamalipour

Professor and Head, Department of Communication & Creative

Arts, Director Center for Global Studies, Purdue University

Calumet, 2200 169th Street Hammond, IN 46323-2094, USA

CONTENTS

1 Metacognition and Reading in Children: A State

of the Art Review

Bushra Ahmed Khurram

25 An Investigation of Pakistan’s Manufacturing

Sector Corporate Investment Under Financial

Liberalization

Salman Ali Qureshi, Syed Muhammad Amir

Shah & Syed Hassan Raza

77 The Impact of Consumer Beliefs on Consumers’

Attitude: A Social Media Advertising Perspective

Qazi Mohammed Ahmed, Muhammad

Mustafa Raziq, Abeera Babar Goreja

105 A Meta-functional Analysisof Baba Bulleh

Shah’s Kaafi: Ranjha Ranjha Kardi Hun Mein

Apey Ranjha Hoi

Priya Avais, Muhammad Shaban &

Nadia Anwar

141 The Impact of GDP, Inflation, Exchange Rate,

Unemployment and Tax Rate on the Non

Performing Loans of Banks: Evidence From

Pakistani Commercial Banks

Ihtesham Khan, Adnan Ahmad, Muhammad

Tahir Khan & Muhammad Ilyas

165 Critical Boundaries of Activism in Public

Relations in Pakistan: A Comparative Analysis

of Effects of Professional Practices

Mudassir Mukhtar, Noshina Saleem &

Stephen D. McDowell

Bushra Ahmed Khurram*

Metacognition and Reading in

Children: A State of the Art Review

ABSTRACT

The aim of this paper is to provide a review and synthesis of

the literature on metacognition and reading in children. The

paper begins with a brief discussion of what metacognition is

and presents the components of metacognition. It then reviews

the key studies that have been conducted on metacognition

and reading in children. The first part of the review discusses

the empirical studies which examine children’s metacognitive

knowledge. The second part considers the research concerned

with children’s monitoring of comprehension. The final part

discusses the studies conducted on training of metacognition

about reading in children. The paper concludes by reviewing

the current research on metacognition.

Keywords: Metacognition, Reading, Metacognitive Awareness,

Monitoring of Comprehension, Metacognitive Training.

Introduction

Good readers bring metacognition-in-action to the act of

reading by planning, monitoring and evaluating their own

cognitive processes (Baker, 2002). Research indicates that

metacognitive acts promote reading comprehension as they

* Department of English, University of Karachi, Karachi

Journal of Social Sciences and Humanities: Volume 26, Number 1, Spring 2018

2

guide and coordinate thinking (Baker & Brown, 1984). A

number of research studies establishe the centrality of the

construct of metacognition in reading (e.g. Brown, 1987;

Alexander & Murphy 1998). The importance of

metacognition is therefore ‘now firmly established in theories

of learning and reading' (Baker, 2002, p.77).

Definition of Metacognition

Metacognition has been defined by a number of theorist.

Armbruster, Echols and Brown (1983) has defined

metacognition as the knowledge and control a reader has over

his or her reading processes. Along similar lines, Mokhtari and

Reichard (2002, p. 249) have defined metacognition as ‘the

knowledge of the reader’s cognition about reading and the

self-control mechanisms he/she exercises when monitoring and

regulating text comprehension.’ In other words, metacognition

makes readers aware of their reading processes,

comprehension break down and the strategies they could use

to read successfully. This is why, the literature stresses that

‘students without metacognitive approaches are essentially

learners without direction or opportunity to review their

progress, accomplishments, and future directions’ (O’ Malley et

al. 1985, p. 561).

Components of Metacognition

Metacognition is usually conceptualized as having two

fundamental components: 1) metacognitive knowledge and

2) regulation of cognition (Harris, Santangelo & Graham,

2010; Schraw & Moshman, 1995). Researchers are of the

opinion that these two components are distinct but not


3

independent of one another (Griffith & Ruan, 2005; Schraw

& Moshman, 1995).

The first component of metacognition, metacognitive

knowledge, is 'that portion of the total knowledge base that

pertains to a given area of cognitive activity' (Flavell 1985,

quoted by Garner,1987). Flavell (1987) proposed that

metacognitive knowledge includes knowledge we have

about ourselves, the tasks we face and the strategies we

employ in specific cognitive domains. In the cognitive

domain of reading, research has indicated a casual role of

metacognitive knowledge in reading comprehension

(Pressley, El-Dinary, Gaskins, Schuder, Bergman, Almasi, &

Brown, 1992).

The second major component of metacognition,

regulation of cognition, refers to metacognitive activities that

help control one’s thinking or learning (Schraw & Moshman,

1995). Baker & Brown (1984b) indicate that regulation of

cognition involves the ability to use the self-regulatory

mechanisms such as checking, planning, evaluating, revising

to ensure successful completion of the task.

Research on Metacognition in Reading

In the 1970s a number of studies was conducted related

to metacognition and reading (e.g., Anderson, 1991; Carrell,

1989; Knight, Pardon, & Waxman, 1985). Although some of

these studies had adults as subjects, most of the early

research on metacognition and reading was carried out on

children (El-Hindi & Amelia, 1993). This section reviews the

empirical studies which examine children’s metacognitive

knowledge, monitoring of comprehension and training of

metacognition about reading in children.


4

Studies of Metacognitive Knowledge

The early research in the area of metacognition and

reading in 1970s was primarily of a descriptive and

correlational nature (Baker, 2008). An early landmark study of

metacognition and comprehension in young readers was

carried out by Myers and Paris (1978) who assessed the

knowledge of the person variable, task variable and strategy

variable involved in reading of the children of the second

and sixth grades. The results of their study showed that

younger children had less understanding of reading: they

took reading as a process of decoding text rather than

meaning-making. In addition, the study showed that the

older children were more cognizant of the reading strategies

that are used to determine meaning of words or sentences,

such as rereading to deduce the meaning from context,

using a dictionary or asking for help from a knowledgeable

other. Older children were also aware of the purposes of

reading strategies as compared to the young children. A little

later, researchers in the area of metacognition and reading

started to investigate individual differences in students'

metacognitive knowledge. A significant study that was

carried out by Garner and Kraus (1981-82) investigated

individual differences in the metacognitive knowledge of

better and poorer readers. The results of the study

demonstrated that as compared to the poor readers, better

readers had more awareness and control of reading. It is

noteworthy that the findings of these two early studies have

been held up over time: older and successful readers show

higher levels of metacognitive knowledge and more skilled

regulation of reading (Baker and Beall, 2009, p 373).


5

The research outcomes of recent L2 studies look

remarkably similar to earlier studies. This can be seen in the

study by Eme, Puustinen, and Coutlet (2006) with third and

fifth grade students in France. Their study showed that fifth

graders as compared to third graders were more likely to

consider understanding as a characteristic of a good reader.

For third graders, a skilled reader was the one who read the

text quickly without making any mistake.

Most of the research on developmental changes in

metacognition is cross-sectional. However, the literature

indicates that longitudinal studies replicate the results of

earlier studies on metacognitive knowledge. For instance,

Annevirta & Vauras (2001) undertook a longitudinal study to

examine the metacognitive knowledge of Finnish children

from preschool through the third grade. Interviews were

conducted to tap knowledge about memory, learning and

comprehension. Results of the study showed that children

had understanding of memory processes even at the

preschool level. By the first grade children recognized the

active role of the self in learning. However, metacognitive

understanding of comprehension was not evidenced before

the second or third grade. And it was not until the third

grade that students described evaluating and monitoring

their understanding. In sum, when children were younger

they did not show understanding of reading as a meaning-

getting process.

Recently, researchers have started investigating if there is

stability in metacognitive knowledge over time and if the

relations between reading comprehension and metacognition

are consistent over time. For example, Roesch-Heils,

Schneider, and van Kraayenoord (2003) followed up children

who had participated in a study conducted earlier by van


6

Kraayenoord & Schneider (1999). In the study the researchers

reassessed metacognitive knowledge of Grade 7 or 8 German

children in relation to reading comprehension and reading

motivation that was first examined in Grades 3 or 4. Results of

the study showed that students who scored higher on

assessment of metacognitive knowledge in Grades 3 or 4

continued to score higher in Grades 7 or 8. The study also

indicated important links among reading interest, motivation

and metacognition at both time points. Children who were

more interested in reading had better metacognitive skills and

performed better on reading assessments in Grades 3 or 4

and in Grades 7 or 8. Moreover, metacognitive knowledge

was a significant predictor of reading comprehension in

Grades 3 and 4 as well as in Grades 7 and 8. Similarly,

Bouchard (1998) conducted a longitudinal study that focused

on similar questions. She examined interrelations between

self-system, reading achievement and metacognitive

knowledge when children were in the fourth grade and then

when they were in grade 6. Results indicate that there was a

correlation between self-system and reading measures at

each time point. In addition, the patterns of relations were

similar over time.

Research conducted in the area of metacognitive

knowledge indicates that metacognitive knowledge precedes

metacognitive control (Baker & Brown, 1984a). This implies

that students need to have ‘a sufficient level of internalized

metacognitive knowledge before they can use it effectively

to guide their own learning’ (Baker, 2008a). However, the

literature also indicates that it is not sufficient for students to

only have metacognitive knowledge to regulate their

cognition. For instance, Annevirta & Vaurus (2006) in their

longitudinal study discussed previously Annevirta & Vaurus


7

(2001) studied metacognitive skills of a subset of sample for

three years, preschool, first grade and second grade. For this

purpose, they selected three groups of children representing

low, intermediate and high levels of metacognitive

knowledge. The results indicate that low or average

metacognitive knowledge group did not demonstrate

comprehension monitoring at any grade over three years. On

the other hand, out of the sample a few children whose

metacognitive knowledge was demonstrated comprehension

monitoring in preschool and first year. However, more

demonstrated comprehension monitoring in second year. In

addition, children with high metacognitive knowledge

showed considerable growth in metacognitive control. In

contrast, children with low metacognitive knowledge showed

very little growth in metacognitive control. Furthermore,

whereas no children with low metacognitive knowledge

showed good metacognitive control, some children with

high metacognitive knowledge did not demonstrate

metacognitive control either. Similarly, Hacker’s (1997) study

with adolescents in grades 7, 9 and 11 also indicates that

although some students in his study have the necessary

knowledge to monitor their understanding of the text, they

did not use that knowledge. Baker (2008a) indicates that

these studies illustrate the ‘importance of will in addition to

skill’ for metacognitive monitoring (p. 32, emphasis in

original)

Studies on Monitoring of Comprehension

In the 1970s researchers also started documenting

developmental and individual differences in students’

comprehension monitoring abilities (Baker, 2008b). For this


8

purpose, researchers studied self-correction, an evidence of

comprehension monitoring (Baker & Brown, 1984a), made by

readers in an attempt to understand the reading process.

The findings from these studies showed that when good

readers, whether first graders or adults, made an error that

distorted meaning they corrected themselves. However, poor

and average readers did not correct themselves even if the

errors distort meaning.

Researchers in the early 1980 studies started using an

error detection paradigm to study comprehension

monitoring while reading rather than waiting for readers to

make and correct their reading errors. In this paradigm errors

or problem are introduced in the text. Researchers use

various indices such as asking readers to underline or report

detected errors to find out whether readers noticed the

problem and made attempt to resolve them. An early study

that used the error detection paradigm was conducted by

Baker (1979). This study investigated college students’

comprehension monitoring. The results of the study showed

that the college students do not consistently monitor their

comprehension. On the other hand, the study by Baker

(1984) on children's comprehension monitoring using the

same paradigm showed that many children of the fourth and

sixth grades who were given specific instructions regarding

the type of problem identified more problems overall as

compared to those who were not given such instructions.

However, the problems that were identified were at the word

level only. This finding confirmed the results of Myers and

Paris's (1978) study that showed that children regard reading

as a decoding process. Interestingly, contemporary advances

in cognitive development work have informed us that such

children are called 'word callers' (Cartwright, 2009). It is now


9

known that beginning and struggling readers are less flexible

and they consider only one aspect of print, usually

graphophonological information and do not consider other

important aspects of print, like meaning (Pressley, 2002c).

Other early important studies on comprehension monitoring

by Harris, Kruithof, Terwogt, and Visser (1981), Paris and

Myers (1981), Winograd and Johnson (1982), and August,

Flavell and Clift (1984) showed that more skilled and older

readers demonstrated better monitoring of comprehension

as compared to less skilled and younger readers. However,

these studies did not show that there is a casual link between

ineffective monitoring and poor comprehension (Baker and

Brown, 1984a). A study that showed such a link was carried

out by Bereiter and Bird (1985) which will be discussed later.

Another approach used in early research and continued

through the present is to ask readers to reflect on their

reading process either during or after reading. Several

studies used this approach. For instance, Collins et al (1980)

used protocol analyses to understand how adult readers

processed a short, difficult-to-understand passage he gave

them. The study findings showed that adult readers used

complex processes such as evaluating text for completeness

and interconnectedness to understand it.

Research in students’ comprehension monitoring abilities

continues today. However, researchers in their studies now

examine other contributors to reading comprehension along

with comprehension monitoring. For instance, recently Zinar

(2000) carried out a study to examine the contribution of the

skill of word-identification and strategies used for monitoring

reading comprehension. He used error detection paradigm to

measure fourth grade children’s online comprehension

monitoring. Results showed that word identification was the


10

strongest predictor of reading comprehension. However,

comprehension monitoring behaviour was the significant

additional variable in reading comprehension and can be

used to compensate for weakness in word-identification

skills.

Researchers have also examined the contribution of

comprehension monitoring along with working memory and

other contributors of reading comprehension. For instance,

Cain, Oakhill, and Bryant (2004) examined the contribution of

comprehension monitoring to comprehension along with

working memory and inference making. In their study they

assessed the comprehension monitoring of English children

ages 8-11 with error detection tasks. Results of the study

showed that comprehension monitoring and working

memory were significant predictors of text comprehension.

In addition, the results showed that comprehension

monitoring accounted for unique variance after controlling

working memory and other background variables. Other

studies also showed link between comprehension

monitoring and working memory. For instance, Oakhill, Hartt

and Samols’s (2005) study showed that working memory

limitations were responsible for students’ difficulties in

identifying inconsistencies in text. Another study by Walczyk,

Marsiglia, Johns, & Bryan (2004) indicate that young readers

can compensate for limited processing abilities by pausing to

understand a phrase or sentence, rereading and looking

back to reprocess the text more often than efficient readers.

Studies on Training of Metacognition

The early descriptive studies that demonstrated

differences in metacognitive knowledge and control led to


11

the design and implementation of training studies since ‘they

stimulated interest in the possibility that metacognitive skills

might be deliberately fostered’ (Baker, 2008b, p. 67). In these

studies, students were divided into groups that received or

did not receive instruction to promote metacognitive

knowledge and/or control. Results of these studies quite

consistently showed that students did become cognizant of

their reading processes and improved their comprehension

monitoring ability. For instance, a study conducted by

Bereiter and Bird (1985) taught a set of strategies to seventh-

grade students. The results of the study showed that

students increased their use of strategies through training.

More importantly, it showed that students’ reading

comprehension also improved.

Other than Bereiter and Bird's (1985) study, several training studies that incorporated metacognitively-oriented instruction were implemented in reading classrooms in 1980s. The goal of these studies was to enhance metacognitive knowledge and comprehension monitoring skills of skilled and unskilled readers. For instance, Paris, Cross and Lipson (1984), trained third and fifth grade children to use various comprehension and comprehension monitoring strategies over a period of 12 weeks. In this study students learnt about reading strategies and how and when to use them. The findings of the study showed that metacognitive-oriented instructions promoted metacognitive knowledge about reading and comprehension monitoring successfully. However, it did not yield gains on reading comprehension test. Another illustrative study that was conducted by Palinscar and Brown (1984) using reciprocal teaching approach showed that strategy use and comprehension monitoring can be promoted in students by making them aware of comprehension monitoring processes. The general conclusion that emerged from these and other early studies of the relationship between metacognition and


12

reading (e.g. Baker and Zimlin, 1989; Bereiter and Bird, 1985; Miller, 1985, 1987) was that metacognitive knowledge and regulation of reading could be fostered. The literature also indicates that providing explicit metacognitive information about strategies increases their use (Pressley, Borkowski, & O’Sullivan, 1984, 1985; Pressley and Gaskin, 2006). However, research also indicates that the transfer of metacognitive understandings about strategies depends on providing students guided practice on the use of strategies, and encouraging student reflection on the application of strategies (e.g., Fogarty, Perkins, & Barell, 1992, cited in Pressley and Gaskin, 2006, p. 104). In sum, it can be seen from the above review that metacognitive knowledge and regulation of reading strategies could be fostered in children. Despite this, Pakistani children have not been afforded metacognitive reading strategies instruction to date since no published paper has reported implementing such instructions at the school level in Pakistan. Hence, teachers and researchers need to carry out research to understand the teaching practices that could be applied to Pakistani classrooms to foster metacognition about reading in children. Put another way, practitioners in Pakistan need to understand how they could promote metacognition about reading in children since metacognitive reading instructions are ‘new’ to Pakistani context (Edge & Mann, 2013).

Current Research on Metacognition

The current literature on metacognition recognizes the

importance of motivation, self-efficacy, and peer

collaboration. Some researchers assert that the 'self-system'

underlies the development of metacognitive system (e.g.,

Borkowski, Carr, Rellinger, & Pressley, 1990, cited in Baker

and Beall, 2009). Researchers have also examined the role

motivation and attributional beliefs play in the deployment


13

of metacognitive strategies (Borokwski, Chan, &

Muthukrishna 2000). For instance, De Sousa & Oakhill (1996)

demonstrated that level of interest plays a role in

comprehension monitoring. To elaborate, in their study of 8-

9 years’ old who had similar vocabulary and single-word

reading skills but different comprehension skills were asked

to participate in two tasks. To perform these tasks children

had to read short passages to identify embedded problems

in them. One of these two tasks was a typical school-like

reading task, whereas the other was a more game like task

that children later rated as more interesting. Results of the

study showed that children who were poor in

comprehension performed significantly better on the task

they found interesting as compared to the school-like

traditional task. On the other hand, performance of good

comprehenders remained same across tasks. This study has

important implications for research and practice since it

suggests that poor comprehenders can show higher levels of

ability than they otherwise would provided they are

sufficiently motivated. Other previously discussed studies by

Roeschl-Heils et al (2003) and Bouchard (1998) also point

towards strong and stable correlations among

metacognition, comprehension and motivation. Therefore,

some researchers consider metacognition and motivation to

read to be directly linked with each other (Dunlosky &

Metcalfe, 2009; Guthrie et al., 2004).

Conclusion

The review of the literature reveals an overwhelming

amount of information on metacognition and reading in

children. Some trends in this literature are apparent. The first


14

trend emerging from this body of literature is that older and

successful readers show higher levels of metacognitive

knowledge and more skilled regulation of reading (Baker and

Beall, 2009, p 373). To elaborate, it appears from studies that

when children were younger they did not show

understanding of reading as a meaning-getting process.

Second, the literature indicates that students who scored

higher on assessment of metacognitive knowledge in earlier

grades continued to score higher in later grades. Third, the

literature also shows important links among reading interest,

motivation and metacognition. Children who were more

interested in reading had better metacognitive skills and

performed better on reading assessments in earlier grades as

well as in later grades. Lastly, it also appears from the

literature that the research has yet not determined how to

help students apply strategies independently to texts 'in

millions of diverse classrooms around the world' (Block &

Duffy, 2008). For instance, as mentioned earlier, no research

has yet been carried out to foster metacognition of reading

strategies in Pakistani children. Perhaps this is why research

still shows 'familiar student limitations in metacognitive

knowledge and control that were characteristic of students

studied 30 years ago' (Baker, 2008b, p. 76). Hence, the review

of the literature would suggest that there is a need for

further research on training of metacognition about reading

in children in different context, including that of Pakistan.


15

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Salman Ali Qureshi*

Syed Muhammad Amir Shah**

Syed Hassan Raza***

An Investigation of Pakistan’s Manufacturing

Sector Corporate Investment Under Financial

Liberalization ABSTRACT

Previous studies at macro level resultantly favor the financial

liberalization and growth of a country. On the other side the

studies conducted at the micro level show mixed results and

there is a dearth of literature for accepting/rejecting the

notion of financial liberalization at the micro level. The

present study examines the impact of Financial Sector Reforms

on the Investment of Manufacturing Sector listed at Pakistan

Stock Exchange. A unique index for measuring the Financial

Liberalization is developed obtaining the data from Financial

Sector Assessment Progress Review Report (1991-2004) and

Economic Survey of Pakistan (2005-2014). The data for

manufacturing firms is extracted from Balance Sheet Analysis

published by State Bank of Pakistan. The sample includes the

companies that remained listed at Pakistan Stock Exchange

from 1993 to 2014 in sample. Separate analyses were made

on different manufacturing sectors that includes Textiles,

* Assistant Professor, Department of Business Administration, Allama

Iqbal Open University, Islamabad **

Professor, Department of Commerce, Allama Iqbal Open University,

Islamabad ***

Professor, Department of Business Administration, Allama Iqbal Open

University, Islamabad


26

Food, Chemicals, Other manufacturing, Motor Vehicle, Fuel &

Energy, Communication, Refined Petroleum, Paperboard, and

Electrical Machinery. The study utilized descriptive analysis

and fixed effect model on the panel data of two hundred and

ninety four (294) firms in GRATEL. Amongst different

industries the investment level of textile sector is increased

whereas, food and non metallic minerals do not improve

much. Furthermore, upon the basis of results the

communication and transport sector require attention towards

liquidity, risk, and growth to achieve benefits for improving

their investment function.

Keywords: Financial Liberalization, Firm Level Investment,

Profitability, Tangibility, Liquidity, Risk, and Growth.

Introduction

The growth of an economy relies upon the well functioning

of financial system because it assists to mobilize the financial

resources, improves managing risks, and allocate financial

resources to the efficient projects. The effective financial

structure provides mechanism for payment arrangement and

encourages trade among participants, which leads to the

financial development (Levine, 1997). Bagehot (1873) coined

the importance of financial development for the maturation

of any economic system. The developments in the financial

system are triggered by the financial reforms. Several

countries introduced financial reforms in both domestic and

international perspective in the last two decades (Hermes &

Lansing, 2005).

During 1970’s and 1980’s government led developments,

nationalist policies, and economic subversion were observed

Salman Ali Qureshi, Syed Muhammad Amir Shah & Syed Hassan Raza

27

in transition and developing countries. Therefore, the

financial system was believed as an instrument of treasuries

by the governments for monetary and fiscal policies, interest

rates, and distribution of financial resources. The resources

were addressed to the favored sectors through various

channels in the financial mechanism. The banks were

instructed to direct the credit to the favored sectors rather

than abiding by the prudential regulations (Guermazi, 2014).

The interest rates to depositors were low to maintain the

cost of capital low for improving the distribution of cash in

hand and generating extra demand for credit (Lenuta, 2012).

The capital was not controlled by the governments for

national saving in fact; it was to control the interest rates and

economic volatility. The dominance of capital was a revenue

enhancement for those unwilling to avoid such taxes, which

ultimately encouraged corruption (Hanson, 1994). Ultimately

changes lead to the repressed financial mechanism. The

financial repression is a set of policies, laws, formal

regulations and informal control of diverse financial

operations of the country. It includes fixing interest rates,

prices, exchange rates, and flow of funds within and outside the

country. Importantly, financial repression inhibits the

operations of the financial intermediaries at their total potential

(Denizer et al, 1988).. The political pressure and corruption

added to the repressed financial system and the recovery of

loans was insufficient. The borrowers treated loan as just a

transfer from the financial institutions (Schmukler, 2004).

To break away from the state of repressed financial

system and accomplish the financial objectives of a country;

the world financial systems are integrated with a series of

reforms & policies aiming to liberalize their financial sectors.

Financial liberalization reforms consist mainly of the removal


28

of administrative controls on interest rates and the scaling

down of direct credit programs (Leaven, 2003 & Schmukler,

2004).

Financial liberalization is a steady and multifold process

that tries to reduce the control on the financial sector of a

country. Financial liberalization attempts to attain

development and stability through dismantling the

restrictions on the domestic interest rate, financial markets,

and control of capital flows. Liberalization of financial system

comprises of establishing the price control mechanism which

works by deregulating credits, interest rates, privatizing

domestic financial institutions, diminishing entry barriers for

international financial corporations, and supporting foreign

financial transactions. It also refers to the measures which

aim at reducing the regulatory controls imposed on the

institutional structures, official documents and activities of

agents in the different segments of the financial sector

(Chandrasekhar, 2004 & Ghosh, 2005).

Most by developing countries have initiated financial

liberalization process in the past decades. Financial

liberalization has been implemented in both domestic and

international scopes. The former includes deregulation of

interest rates and a reduction of directed credit while the

latter involves the opening of equity and bond markets.

The effects of liberalization in financial markets on

economic growth have received considerable attention in the

literature. McKinnon (1973) and Shaw (1973) propose that

liberalization can promote economic growth. More recently,

financial endogenous growth models emphasize the role of

financial development for growth. Among others, Bekaert,

Harvey, and Lundblad (2001) empirically show that equity

market opening leads to an increase in economic growth.


29

The theoretical and empirical studies cover the subject of

financial liberalization with respect to both dimensions i.e.

negative and positive. It is true that financial liberalization at

different levels may malfunction but one should not forget

that it may be beneficial on other levels of saving and

investment. A large body of literature emphasizes on the

positive link between financial markets and the growth of the

country. The literature on the arena of financial liberalization

focus on the macroeconomic impact of financial market

deregulation and test the predictions on the aggregate

economic data leaving the empirical research on the effects

of such reforms on the firm level data (Gelos & Werner,

2002; Leaven, 2003; Koo & Maeng, 2004; Koo & Shin 2005;

Bhaduri, 2005; Kose et al., 2006; Carreira et al., 2010 and Ziad

& Gharaibeh, 2011).

In an imperfect market condition, the subject of firm-level

investment never dies. Researchers have applied different

methodologies to see whether financial reforms helped to

improve investment of firms or not? The research work

conducted in Indonesia by Harris et al., (1994), Guncavdi et

al., (1998) for Turkey, Gelos & Werner (2002) for Mexico,

Wang (2003) for Taiwan, Koo & Maeng (2004) for South

Korea, Bhaduri (2005) and Ghosh (2006) for India. Broadly, it

is observed that liberalization reforms delivered beneficial

results. However, the work of Gelos & Warner (2002) and

Wang (2003), and Bhaduri (2005) show conflicting results.

Gelos & Warner (2002) and Wang (2003) argue that

liberalization of financial sector supported small size

corporations and large firms did not benefited much from it.

Bhaduri (2005) argued that financial liberalization reforms

were unfavorable for young and small sized firms in India.

However, after the careful review of the literature the general


30

impression that emerges from the review of literature is that

the evidence remains inconclusive.

Due to this differential outcomes and literary support

from prior literature it guides the present study to

investigate the possible influence of financial liberalization

on firm level investment in different manufacturing sectors of

Pakistan. For this reason the study utilized sample of 294

firms from 12 different sectors from 1993-2014 that includes

Textile, Food, Chemical Products, Other Manufacturing, Non

Metallic Minerals, Motor Vehicle, Fuel and Energy,

Communication, Refined Petroleum, Paper and Cardboard,

Electric Machinery, and others.

Literature Review

Investment of Firms in Imperfect Markets

According to Modigliani & Miller (1958), a firm’s investment

depends entirely on the profitability of its investment

opportunities. A developing body of literature, however, has

found that the firms’ investment depends on the availability of

internal finances. Two streams of literature investigate why

investment is sensitive to internal funds in imperfect financial

markets. The first focuses on a non-negligible premium for

external finance that firms should pay. Myers & Majluf (1984)

and Stiglitz & Weiss (1981) prove that the monetary value of

external funds is more eminent than that of internal funds

because of the asymmetry of information between borrowers

and lenders. Firms face a constraint in financial markets

because of a wedge between costs of internal and external

funds. Under such a financial constraint, firms tend to rely on

internal funds to finance investment. The second stream of


31

literature attributes the importance of internal funds for

investment to managerial agency problems. As noted by

Jensen & Meckling (1979), managers who are not owners may

follow their own interests, not the stockholders’ interest. Jensen

(1986) argues that managerial discretion is likely to induce

managers to spend all available funds on investment projects.

A great body of literature has empirically examined

whether imperfections in financial markets influence firms’

investments. Most studies interpret the cash-flow effect on

investment as resulting from financial constraints. Fazzari et

al., (1988) initially show that, utilizing the dividend–payout

ratio as a measure of the financial constraints faced by firms,

investments of more financially constrained firms are more

sensitive to changes in cash flow. The existing empirical

studies have used various segmenting variables to identify

unobservable degree of financial constraints, for example:

group affiliation in Hoshi et al., (1991); firm size and age in

Devereux & Schiantarelli (1990); issuing commercial paper

and bond ratings in Whited (1992); exchange listing in Oliner

& Rudebusch (1992); ownership structure and country

characteristics in Bond et al., (2003).

The studies argue that financial liberalization causes the

variations over time in the responsiveness of investment.

Financial liberalization influences asymmetric information

and agency conflicts between managers and shareholders. In

particular, various liberalization policies play the role in

reducing asymmetric information problems in financial

markets. The managerial agency problems are attenuated

because financial institutions tend to monitor managers’

behaviour more intensively.

Developments in security markets and financial market

opening also result in a reduction of the cost of external


32

financing. The financial liberalization reduces the wedge

between the costs of external and internal funds and thereby

decreases the cash-flow effect on investment of financially

constrained firms. Although an increased availability of credit

with the financial liberalization should have led to a

reduction of liquidity constraints, there’s no cause to believe

that informational and enforcement problems that motivate

the usage of collateral diminished after the liberalization of

the financial sector.

There is, yet, mixed empirical evidence for the consequence

of financial liberalization on firms’ investment. Examining panel

data of firms Laeven (2003) concludes that financial

liberalization relaxes financing constraints on firms, specially

small ones. Various studies report that financial reform made a

decrease in financial constraints using an individual country

data, for instance: Harris et al., (1994) for Indonesia; Gelos &

Werner (2002) for Mexico; Guncavdiet al., (1998) for Turkey;

and Koo & Shin (2005) for Korea. Forbes (2003) demonstrates

that the Chilean capital controls increased financial constraints

for small firms. Jaramillo et al., (1996), nevertheless, neglect to

offer evidence that fiscal reform in Ecuador served to ease

financial constraints on small firms. Using Chilean data, Hermes

& Lansing (1998) also describe that the reforms did not

improve access of small and young firms to external finance. In

light of mixed empirical findings, it is important to further look

into the issue of financial liberalization on firms’ capital

structure and investment.

These reforms were directed toward institutional

development to advance the economic growth in the country

(Waliullah & Nishat. (2008). Several researchers (Myers &

Majluf, 1984; Love, 2000; Laeven, 2000; Harris, et al, 1994;

Gelos & Werner, 2002; Guncavdi, et al, 1998) have shown that


33

financial development eases out financial constraints thus

providing the firms with the opportunity to easily access

funds. So reform is required to experience mixed relationship

with leverage and investment of the firm (Ziad & Gharaibeh,

2011; Koo & Shin, 2005; Galindo et al, 2007; Carreira et al.,

2010; Yan et al., 2011; and Guermazi, 2014).

Firm Investment Under Financial Liberalization

Many studies argue that financial liberalization causes the

variations over time in the responsiveness of investment to

internal fund. Financial liberalization influence asymmetric

information and agency conflicts between managers and

stockholders. In particular, various liberalization policies play

the role of reducing asymmetric information problems in

financial markets by improving banks’ screening ability. Also,

managerial agency problems are attenuated because

financial institutions tend to monitor managers’ behavior

more intensively. Developments in security markets and

financial market opening also result in a reduction of the

cost of external financing. We thus expect that financial

liberalization reduces the wedge between the costs of

external and internal funds and thereby decreases the cash-

flow effect on investment of financially constrained firms.

There are, however, mixed empirical evidence for the

effect of financial liberalization on firms’ investment.

Examining panel data of a large number of firms in 13

developing countries, Laeven (2003) concludes that financial

liberalization relaxes financing constraints on firms, especially

small ones. Several studies report that financial reform

caused a reduction in financial constraints using an individual

country data, for instance: Harris, Schiantarelli, and Siregar


34

(1994) for Indonesia; Gelos and Werner (2002) for Mexico;

Guncavdi, Bleaney, and McKay (1998) for Turkey; and Koo

and Shin (2004) for Korea. Forbes (2003) recently shows that

the Chilean capital controls increased financial constraints for

small firms. Jaramillo, Schiantarelli, and Weiss (1996),

however, fail to provide evidence that financial reform in

Equador served to ease financial constraints on small firms.

Using Chilean data, Hermes and Lensink (1998) also report

that reforms did not improve access of small and young

firms to outside finance. In light of mixed empirical findings,

we need to further investigate the effect of financial

liberalization on firms’ investment.

Firm Specific Factors and Investment under Financial

Liberalization

Firm enhance their production by investing in fixed assets

like plant, machinery, motor vehicles, land and building. It is

inevitable for organization to sustain without investment in

fixed assets. A firm can achieve long term profitability by

investing in long term assets. In determining profit ratio

efficiency assets play pivotal role. The future is unpredictable

by the companies and it has possible implications on the

investment decisions. Investment includes purchase of

equipment of production with durable life like machines and

production equipment. Fixed assets expenditure attained the

attention of researchers’ worldwide (Dayaratne et al., 2015).

Firm size may be determined by various techniques.

Previous literature sheds light to utilize log of assets, revenues,

and employees working in the organization. However, the

measurement of firm size depends upon the available

information from authentic sources. Size is an important


35

determinant of a firm’s investment and previous studies

managed to find out the possible association and identified

inverse relationship between size and investment level of firms

Bokpin & Onumah (2009). Contradictory results were

mentioned in the studies of Adelegan and Ariyo (2008), Jangili

and Kumar (2010), Li et al. (2010), and Porras and Lopez (2011)

that there is a positive relationship among size of the firm and

level of investment. Because large companies have better

information and access to external sources of capital that

small firms and hold consistent cash flows. On the basis of

above discussion the size of the firm is expected to have mix

relationship with the dependent variable, investment.

The overall objective of the firm is to increase the

profitability. Profitability is simply the capacity to make a profit,

and a profit is what is left over from income earned after you

have deducted all costs and expenses related to earning.

Profitability is measured as return on equity and return on

assets. Theoretically, increase in profitability leads to increase in

fixed assets investment. Deepankar and Das (2015) find out

positive relationship between profitability and investment.

Firms with more tangibility are able to sustain more and

gain financing from external environment. One of the

important reasons that tangibility helps to mitigate

contractibility problem and increases the value of the firm

which can be recaptured in case of default (Xu et al., 2013).

However, study show that investment sensitivity is increasing

with the increase in firm asset tangibility. On the basis of this

assumption an empirical analysis is important for the Pakistani

manufacturing firms. Earlier studies attempt to capture the

financing friction and investment of corporate sector listed

firms under various financial regimes. Corporation that invest


36

more in tangible assets tend to have more borrowing capacity

and the change is level of investment is proportionally

enhanced. The possible argument could be that credited

multiplier is expected to be higher due to greater tangibility.

Therefore, theory suggested that tangibility increases

investment (Sheikh & Wang, 2011).

Liquidity of the firm maintains relationship with various

other factors like financing patterns and performance of the

firm. It is also observed that liquidity creates a positive

relationship with investment (Manova et al., 2015) because

higher liquidity helps to improve the financing for investment.

Studies have shown that firms with financial constraints are

more sensitive to the available liquidity. The relationship gets

stronger in firms with greater opportunities for investment. Past

literature also sheds considerable light and provides evidences

that investment opportunities are sensitive to the liquidity

position of the firm and market conditions (Jorion and Zhang,

2007). So liquidity of the firm should help as a catalyst for

making investment decisions. The results show that the effect

of liquidity is higher in firms with greater investment

opportunities, which was tested including interaction between

liquidity and a dummy that identifies whether the firm has

greater investment opportunities.

Risk and investment decisions at firm level have been

analyzed in several economic and financial literatures. The

irreversible investment model is off the notion that increased

uncertainty reduces investment of the firm (McDonald & Siegel,

1986; Pindyck, 1988; Dixit & Pindyck, 1994). Firm pertains the

capacity to wait for the uncertain situation to be resolved and

then invest. Informational asymmetries between borrowers and


37

lenders may create financing constraints for certain types of

borrowers (Greenwald et al., 1984; Myres and Majluf, 1984 and

Greenwald & Stiglitz, 1990). Increased uncertainty about future

profitability increases the risk of bankruptcy, and hence, implies

that some firms may have to rely on internal funds for

investment activities, whereas others may have access to

efficient external financing. Resulting in low investment practices

due to increased risk to external constraints of financing.

According to Hartman (1972), firms with more risk averse

behavior tend to invest low. The model of asset pricing (CAPM)

explains that a covariance is observed between the increase in

risk (uncertainty) and returns on the investment project due to

market returns. Whereas, previous studies in the field provide

inconclusive results and tend to tilt on the negative relationship

of the variables. For example, the findings of Leahy and Whited

(1996), Minton and Schrand (1999), Ghosal and Loungani (2000),

and Bulan (2001) lend support to a negative relation between

uncertainty and investment.

Since the important contribution of Kuh (1963) towards

the investment determinants in business environment much

of the work is published in theoretical and empirical

dimension. A few years ago the major issues seemed

resolved, concerning both the relative importance of

explanatory variables and the time pattern of investment.

The growth of a firm is measured as annual percentage

change in total sales (Fazzari et al., 1988). Bilsborrow (1977)

examined the determinants of fixed investment of

Colombian firms and included sales growth as an

explanatory variable. The results provide evidence that

growth has positive relationship with investment of firm. The


38

findings were further supported by Lang et al., (1996).

Therefore, the present study hypothesizes:

H1 = Financial Liberalization has significant affect on the

Investment of the firms.

H1.1 = The interaction of Firm Size with Financial

Liberalization has significant positive effect on the

Investment of the manufacturing firms.

H1.2 = The interaction of Firm Profitability with Financial



H1.3 = The interaction of Asset Tangibility with Financial


Investment of the manufacturing firms

H1.4 = The interaction of Firm Liquidity with Financial

Liberalization has significant negative effect on the


H1.5 = The interaction of Financial Risk with Financial

Liberalization has significant negative effect on the


H1.6 = The interaction of Firm Growth with Financial



Financial Reforms in Pakistan

In Pakistan, State bank and commercial banks were

nationalized in 1974 aimed to achieve socio economic benefits;

however it could not achieve the desired results (Mujahid,

Hashmi, & Abbas, 2014). Multifarious financial deficiencies like

wretched private investment, low range of financial products in

the money and capital market, insufficient financing options,


39

high risk exposure to investor, holding of financial assets by

state owned institutions, deficient liquidity, limited arbitrage

options, high transaction cost, low response to monetary and

fiscal incentives, and vulnerable stock market capitalization

were encountered by the financial markets in Pakistan (Goyal,

2014). The economic growth was slowed due to these

deficiencies. Consistent and efficient financial mechanism is

important for reducing the distortion in financial markets that

shall amplify economic growth.

Therefore to overcome the financial sector deficiencies

Government of Pakistan initiated diverse financial reform in

early 1990s under structural adjustment programs (SAP).

During initial phase notable reforms include privatization of

state owned banks, recovery of bank loans, and

implementation of international accounting standards.

Afterwards from several reforms related to financial markets

for instance minimum capital requirements for the banks,

permission to start subsidiaries (mutual funds), venture

capitalist financing, foreign exchange and asset management

firms, etc. Consumer financing was also introduced in the

same time period to support middle and lower level income

sector (Munir, et al., 2013).

The process of financial liberalization commenced in year

1990 in Pakistan under manifolds. The reforms from 1990-2014

are categorized by State Bank of Pakistan as Privatization

Reforms, Institutional Strengthening, Nonperforming Loan,

Debt Management, Monetary Management Measures,

Exchange Payment, Capital Market Reforms, Banking Reforms,

and Prudential Regulations.

The aim of implementing financial reforms was to widen

and deepen the financial sector of the country. Few policy

measures were targeted to increase the competition in the


40

country and some focused for improving the efficiency of the

financial sector (Amel et al., 2004). Such as removal of entry

barrier for foreign banks and restructuring of state owned

banks. The reforms also include the interest rate deregulation

and reserve requirement of banks. Similarly introduction to

prudential regulations and strengthening the capital markets

were the target of financial reforms. The target of these policy

measures was to strengthen financial markets for attaining

efficiency and stability in the country (Ataullah, Cockerill, & Le,

2004). The present study incorporates the categorization by

the State Bank of Pakistan regarding data of financial reforms

for the period (1990-2014) for development of financial

liberalization index for Pakistan.

Data, Methodology and Financial Liberalization

Index

Financial Liberalization Index

Financial Liberalization Index was constructed in order to

study the degree of financial liberalization process in

Pakistan over the time. Financial liberalization is a procedure

that includes various changes, amendments on existing

policies related to financial matters and launching of new

policies to support various sectors of the economic system.

The present study implies principal component method as

proposed by Bandiea et al. (2000), Leaven (2003),

Laurenceson and Chai (2003), Shrestha (2005), and Amaira &

Amaira (2014).

This study used the major policy components of financial

liberalization, which could influence the capital structure,

investment, and the cost of debt of the manufacturing firms


41

in Pakistan. The present study included Privatization (PRV),

Institutional Strengthening (IS), Non Performing Loans (NPL),

Debt Management Reforms (DMR), Monetary Management

Measures (MMM), Exchange and Payment Reforms (EPR),

Capital Market Reforms (CMR), Banking Reforms (BR), and

Prudential Regulations (PR) nine (09) components having

about three hundred and fifty one (351) reforms in the above

mentioned categories for the construction of financial

liberalization index (FLI) using principal component method.

The following equation is used to measure the financial

liberalization index (FLIt) for the time (t):

Where, t= 1991, 1992……….. 2014 and Wt is the calculated

weight of each component. The financial liberalization index

for each year is obtained by summing up all the individual

indices for a respective period as indicated in equation.

The weight of each component is calculated by applying

the principal component method. The following equation is

used to measure the financial liberalization index (FLIt) for

the time (t):

Where, t= 1990, 1992……….. 2014 and Wt is the calculated

weight of each component. The financial liberalization index

for each year is obtained by summing up all the individual

indices for a respective period as indicated in equation. The

study takes into account the first principal component which


42

accounts for 76 percent of total variance of in all dimensions

of financial liberalization. The weight for each financial

reform dimension is captured. The weight of each policy

dimension is multiplied with the respective value of the

reform in each year. The weight of each financial reform

dimension is entered in equation no (i).

Data

The present study covers all large scale manufacturing

companies listed at Pakistan stock exchange. The research

included the data of the companies that survived from 1993

to 2014. The firms that did not survived for the mention

period or are new entrants were not included in the data set.

Therefore, two hundred and ninety four (294) firms remained

to be included in final analysis as sample.

The present study includes large scale manufacturing

companies in the analysis for the period twenty one years (21)

spanning 1993 – 2014. The data for in depth analysis is

extracted from various sources. The data for the large scale

manufacturing firms was extracted from the balance sheet

analysis published by State Bank of Pakistan. The balance

sheet analysis of large scale manufacturing firms from 1991 to

2013 consists upon four volumes. Three volumes are available

on line and one volume was made available in hard form.


43

Balance sheet analysis volume from 1991 to 1998 was in

hard form, 1999 to 2004, 2005 to 2008, and 2008 to 2013 were

in soft form. Balance sheet analysis from 1991 to 1998 contains

information about 514 listed firms. Whereas, Balance sheet

analysis from 1999 to 2004, 2005 to 2008, and 2008 to 2013

contains data of 451, 436, and 396 listed firms respectively.

Hard form data was transformed in soft form. Data from all the

balance sheet analysis was extracted using MS Excel.

The data for all the sectors was segregated under each

industry head based on the categories mentioned in Balance

sheet analysis volume 2008 to 2013. The data of the

companies that sustained throughout the analysis period i.e.,

1993 to 2014 was extracted cautiously. However, the data

for the year 2014 was not available in Balance sheet analysis

of State Bank of Pakistan therefore the data for year 2014

was extracted from the website of individual company.

Measurement of Variables

The aim of the present study is to investigate the possible

influence of financial liberalization on firm level investment in

different manufacturing sectors of Pakistan. For this reason

the study also included firm size, profitability, tangibility,

liquidity, risk, and growth. The investment is defined as the

purchase of an asset or item with the hope that it will

generate income or appreciate cash flows in the future. Firms

make investment in different type of assets. Table 3.1

explains the measures of variables with literature support:


44

Table: Measurements of Variables

Name of

Variable

Measurement Literature

Support

Firm

Investment(INV)

Investment t = (Kt*– Kt-1 +

Depreciationt)

*Capital (Kt) = Tangible fixed

assets at the period t

Guermazi, 2014;

Yan, 2011; and

Ghosh, 2005

Size (SZ) Ln of book value of total assets Mao & Gu (2008)

Wu (2006)

Kallkan et al.,

(2011)

Profitability

(PRF)

Gungoraydinoglu

& Oztekin (2011)

Sheikh & Wang

(2011)

Growth (GR)

Majumdar (1997)

Mao & Gu (2008)

Tangibility

(TAN)

Gungoraydinoglu

& Oztekin , 2011;

Sheikh & Wang ,

2011, and

Degryse et al,

2012

Liquidity (LIQ)

Gungoraydinoglu

& Oztekin , 2011;

Sheikh & Wang ,

2011, and

Degryse et al,

2012

Risk (RSK)

Nazir et al.,

(2012)


45

Empirical Specifications

The magnitude of the relationship of the dependent and

explanatory variables is tested by applying the regression

analysis. To test the moderation effect of financial

liberalization by creating the interaction terms the study

used lagged values of the variables and financial

liberalization index. For example if the dependent variable is

of year 1994 the independent variables with the interaction

of financial liberalization are of year 1993. One of the

important reasons to use the lagged values is that the effect

of financial reform may take approximately one year.

Therefore, on the basis of the above given references the

basic regression models are developed as follows:

The Subscript “i” is used for the each cross section unit or

firm in the sample data set. Another subscript “t” denotes the

time period for the variables. is the constant of the

regression equation, which explains the change in the

dependent variable. are the

regression coefficients of size (SZE), profitability (PRF),

tangibility (TAN), liquidity (LIQ), risk (RSK), and growth

(GRW), respectively. Where as in the second model lagged

values of all explanatory variables including the interaction


46

terms with financial liberalization index are regressed on the

investment of firms.

Data Analysis Technique

For the data analysis purpose, different techniques are used

in this study including the Descriptive statistics, Correlation

analysis and Regression Analysis etc. Panel data is used for

the analysis purposes in this study which contains n units

(firms) each of them includes T observations at 1 through t

time period. So the total numbers of observations in panel

data are calculated as nT. That panel data which contains

many units (firms) and small time period is known as short

panel data. But if there are less firms and large time periods,

it is known as long panel data (Cameron & Trivedi, 2005).

Several type of models may be used to analyze the panel or

longitudinal data, which include the; Pooled OLS, Fixed Effect

Model and Random Effect Model.

Results and Discussion

The results and discussion section explains the descriptive stats

of the data. It further elucidates the relationship among the

explanatory and dependent variable using correlation analysis.

Essentially this section highlights the results of regression

models on the each manufacturing sector of Pakistan.

Descriptive Statistics

Descriptive statistics are implied to observe the behavior of

the data. It can be viewed by calculating the mean, median,

standard deviation, range, minimum and maximum value of


47

the variable. The present study includes seven variables for

which the data is collected. The total sample size was of

twenty two (22) years, however final data after transforming

for analysis remained for twenty one (21) years. Total

number of counts for each variable is 6174 and numbers of

companies were 294. Therefore, total numbers of

observation used in the present study are 43218 excluding

the observations and data used for developing the financial

liberalization index of Pakistan. Table 4.1 below presents the

descriptive statistics of the data.

Table: Descriptive Statistics

INV SZE PRF TAN LIQ RSK GRW

Mean 10.3277 6.8691 0.1461 0.1951 1.3302 8.0014 0.0765

Median 10.5966 6.7508 0.0001 0.1262 1.0082 0.0036 0.0820

Standard

Deviation 3.3099 1.7498 1.1514 0.2546 1.5686 41.3624 0.5336

Sample

Variance 10.9552 3.0618 1.3258 0.0648 2.4605 1710.8460 0.2848

Range 30.2991 12.7583 17.9438 3.4815 20.9609 386.8000 14.6940

Minimum 0.0000 0.0000 -4.9438 0.0000 0.0000 -99.8000 -6.7167

Maximum 30.2991 12.7583 13.0000 3.4815 20.9609 287.0000 7.9773

Count 6174 6174 6174 6174 6174 6174 6174

The descriptive stats of the data show the nature of all

the variables used in the study. First column shows the

descriptive statistics of the investment variable. The range of

investment of the companies varies tremendously therefore

to cope with the problem of hetroskedesticity log of the

observations was taken. Based upon the transformed values

the mean of investment is 10.3277 which shows the overall

investment level of the non financial listed firms in a given


48

time period. The standard deviation of the investment is

3.3099 which describe the deviation of the data from mean

value. The minimum value is 0.0000 and maximum value is

30.2991 and it shows that there are firm in the sample period

that did not make any investment and firms that make large

investments.

Size of the firms is proxied by taking the natural log of

total assets of the firms in the data. The mean value is 6.8691

which shows the average size of the large scale

manufacturing listed firms in a given time period. The

standard deviation of the investment is 1.7498 which

describes the deviation of the data from mean value. The

minimum value is 0.0000 and maximum value is 12.7583.

The profitability of the firm is measure by Return on

Assets. The mean value is 14.61% which explains the average

accounting performance of the firms. Median explains the

central value in the data with a value of 0.0001. The standard

deviation of this variable is 1.1514 which shows the deviation

from the average value. This variable has – 4.9438 and

13.0000 as minimum and maximum values, respectively. The

minimum and maximum values show that in the sample

there are all types of firms, which are facing huge losses and

those that are enjoying the maximum profit.

Tangibility of the firms is determined by taking the

percentage of fixed assets to total assets. The mean value of

this variable is 0.1951which shows the percentage of fixed to

total assets. The median of this variable is 0.1262 which is the

central value in the data. The variation in the data is found

25.46% as described by standard deviation. The minimum

and maximum values of this variable are 0.0000 and 3.4815,

respectively.


49

Liquidity is the ability to meet firm’s obligations as they

come due. In this data set on average firms have 1.3302

times assets available to meet the short term liabilities. The

median of the data set of this variable is 1.0082. The

standard deviation describes the deviation of the data from

its average value by 1.5686. Minimum and maximum values

are 0.0000 and 20.9609. The maximum value explains that

there are firms in the data which have twenty times more

current assets to meet short term obligations.

Risk is measured by dividing the Earnings before Interest

and Taxes to financial expenses and its average value 8.0014

describes that companies have eight times more earnings

than their financial expenses. The median of this variable is

0.0036 and standard deviation is 41.3624. The minimum

value of this variable is -99.8000 and maximum 287.0000. It

explains that there are firms which have negative profits and

are unable to bear the financial costs. Whereas, some firms

are financially sound having 287 times more earnings

available to meet their financial obligations.

Growth is denoted in decimal points. The average value

of the growth is 0.0765 which describes that the average

growth of all firms in sample data is 7.6%. The median value

is 0.0820 which is more than the mean and shows that the

growth of majority firms is not only high but also the positive

growth. The deviation in the data is 0.5336 reported.

Minimum value of the growth is -6.716 which shows the

negative growth of the firms, that firms are declining

gradually instead of growing. The maximum value is 7.9773,

which shows that there are some firms which grow drastically

by more than seven times.


50

Correlation Analysis

The purpose of correlation analysis is to determine the

relationship among all dependent and independent variables

used in the study. The value of correlation lies between -1 to

+1, negatives values, describe the negative correlation

between the two variables. Positive value means the positive

correlation between the two variables. Correlation table

serves another purpose, which is the test of multicollinearity.

It tells that where the collinearity is found or is not present

among the variables. If the value of coefficient correlation is

nearly to 1, it leads to multicollinearity between the variables.

The following table 4.2 describes the coefficient correlation

between the variables of the study.

Table: Results of Correlations Analysis

*. Correlation is significant at the 0.05 level (2-tailed)

**. Correlation is significant at the 0.01 level (2-tailed).

The coefficients correlations are obtained with the help of

econometric software named as Gretl. Gretl software

performed the Pearson Coefficient correlation analysis to

check the variables relationships and test 2 tailed at 1 % and

5% level of significance. As Table 4.2 shows, there is no high

INV SZE PRF TAN LIQ RSK GRW

INV 1

SZE .298** 1

PRF .059** .071

** 1

TAN .330** .076

** .053

** 1

LIQ -.024* .024 .040

** -.048

** 1

RSK -.017* .085

** .037

** .029

* .111

** 1

GRW .023** .048

** .010 .039

** -.049

** .050

** 1


51

correlation between any two variables which leads to the

problem of multicollinearity. The highest value of the

positive correlation is 0.330. Keeping in view the values of

coefficient correlation, it may be ensured that there is no

multicollinearity in the data. Column 1 of the table explains

the relationship between investment and firm specific

factors. It explains that all the variables are significantly

positively correlated at 1% level other than liquidity and risk,

which are significantly negatively correlated at 5% level.

Corporate Investment Under Financial Liberalization in

Pakistani Manufacturing Sector

Firm enhance their production by investing in fixed assets

like plant, machinery, motor vehicles, land and building. It is

inevitable for organization to sustain without investment in

fixed assets. A firm can achieve long term profitability by

investing in long term assets. In determining profit ratio

efficiency assets play pivotal role. Firms are generally

uncertain about the future. The uncertainty about the future

is likely to affect investment decisions of firms. The study

attempts to find the impact of financial liberalization on the

investment of Large Scale Manufacturing firms with the

following models:


52

Regression Results of Manufacturing Sector of Pakistan

To find out the effect and magnitude of explanatory

variables along with financial liberalization index fixed effect

models are applied on the data set of manufacturing firms in

different sectors of Pakistan. The following table 4.3a

explains the percentage of different industries in the data set

and 4.3b shows the results of regression analysis:

Table: Industry Wise Details of Manufacturing Firms

Sector No of companies

Textiles 38.63%

Food 12.12%

Chemicals, chemical products and

Pharmaceuticals

11.11%

Other manufacturing 8.08%

Other non-metallic mineral products 7.07%

Motor vehicles, trailers and auto parts 5.55%

Fuel & Energy 4.80%

Information, Communication & transport 3.28%

Coke and refined petroleum products 2.27%

Paper, paperboard and products 2.27%

Electrical machinery and apparatus 2.08%

Others 2.77%

Total 100%

Table 4.3b: Results of Fixed Effect Models ***a, **b,* c show the significance of results at 1%, 5% and 10% level of significance respectively

Variables Textile Food Chemic & Phar Non Metallic

Mineral Vehicle-Auto

Parts Fuel & Energy Comm & Transp Paper Products Elec Machine Refined Petrol Other

Manufacturing

Model 1

Model 2

Model 3

Model 4

Model 5

Model 6

Model 7

Model 8

Model 9

Model 10

Model 11

Model 12

Model 13

Model 14

Model 15

Model 16

Model 17

Model 18

Model 19

Model 20

Model 21

Model 22

SZE 0.052a 0.024a 0.148a 0.110a 0.148a 0.108a 0.350a 0.320a 0.029c 0.110a 0.262a 0.491a 0.054a 0.181a 0.083a 0.140a 0.711a 0.623a 0.023b 0.134b 0.350a 0.320a 0.023 0.003 0.046 0.023 0.046 0.037 0.055 0.065 0.025 0.031 0.053 0.192 0.016 0.056 0.016 0.008 0.060 0.061 0.011 0.106 0.055 0.065

PRF 0.027 -0.187a 0.241a 0.214a 0.435a 0.453b -0.300a -0.480b -0.264a -0.267a 0.529a 0.262b -0.104b -0.157b -0.019a 0.002 0.035b -0.000 -0.412a -0.220c -0.300a -0.480b 0.088 0.034 0.031 0.029 0.229 0.222 0.115 0.208 0.038 0.037 0.175 0.037 0.0443 0.076 0.003 0.007 0.016 0.049 -0.128 0.327 0.115 0.208

TNG 0.087a 0.011 0.589a 0.423a -0.092 0.042b 0.290a 0.315a 0.417a 0.494a 0.170c 0.071b 0.064 -0.190a 0.066a 0.041b 0.082a 0.018c -0.057 0.105 0.290a 0.315a 0.031 0.01 0.053 0.042 0.037 0.02 0.063 0.072 0.088 0.092 0.041 0.025 0.041 0.061 0.014 0.021 0.029 0.055 0.059 0.152 0.063 0.072

LIQ -0.093a 0.088a -0.125a -0.078b -0.285a -0.294a 0.022 0.034 -0.094 -0.047 -0.192a -0.744a -0.405a 0.028 -0.161a 0.017 -0.231a 0.045 -0.278a -0.062b 0.022 0.034 0.024 0.012 0.044 0.01 0.072 0.07 0.019 0.023 0.08 0.083 0.053 0.210 0.036 0.020 0.031 0.025 0.082 0.089 0.056 0.023 0.019 0.023

RSK -0.064a -0.124a -0.173c 0.088 -0.275b 0.231 -0.01 0.103 0.004 -0.029 -0.061 -0.014 -0.018 -0.186a -0.015b -0.014 -0.071 -0.053c -0.128a -0.152b -0.010 0.103 0.023 0.007 0.151 0.152 0.126 0.159 0.032 0.063 0.022 0.034 0.046 0.103 0.025 0.028 0.056 0.103 0.063 0.021 0.044 0.109 0.032 0.063

GRW 0.020c -0.005a 0.012c 0.032b 0.042 0.404a 0.030b 0.036c -0.080a -0.109a 0.015 0.017 0.150a -0.066a 0.038a 0.043b 0.045a 0.043c -0.036 0.094 0.030b 0.036c 0.011 0.002 0.82 0.015 0.046 0.09 0.014 0.019 0.024 0.033 0.056 0.069 0.021 0.394 0.011 0.062 0.013 0.064 0.072 0.084 0.014 0.019

SZE*FLI 0.386a

0.049c

0.323a

0.263c

0.0589c

0.301a

0.062c

0.112a

0.611a

0.212b

0.263c 0.034 0.052 0.195 0.241 0.023 0.287 0.037 0.007 0.131 0.233 0.241

PRF*FLI 0.104a

0.155b

0.387a

0.301

0.256c

0.615c

-0.386a

0.022

0.058b

-0.248b

0.301 0.028 0.07 0.525 0.29 0.145 0.145 0.130 0.046 0.041 0.297 0.290

TNG*FLI 0.010b

0.321b

0.310b

0.243c

0.222a

0.204c

0.031

0.112c

0.108b

0.332a

0.243c 0.005 0.015 0.217 0.251 0.064 0.064 0.384 0.062 0.039 0.114 0.251

LIQ*FLI -0.049c

-0.186a

-0.263a

-0.018

-0.031

-0.014

-0.079

-0.279a

-0.473b

-0.436a

-0.018 0.052 0.034 1.252 0.021 0.287 0.062 0.061 0.032 0.054 0.124 0.021

RSK*FLI -0.021c

-0.021c

-0.326c

-0.153b

0.047

-0.073

-0.144b

-0.062a

-0.112c

-0.104a

-0.153b 0.057 0.057 0.185 0.075 0.034 0.134 0.072 0.014 0.062 0.157 0.075

GRW*FLI -0.004

-0.014

-0.656a

-0.007

0.027

0.042

0.362a

-0.279

0.110a

-0.165

-0.007 0.003 0.016 0.113 0.023 0.019 0.133 0.035 0.832 0.012 0.151 0.023

Adj. R2 0.261 0.584 0.373 0.408 0.533 0.565 0.5913 0.64 0.611 0.636 0.445 0.674 0.394 0.679 0.824 0.871 0.725 0.777 0.660 0.769 0.591 0.640

F- Statistic 8.116a 3.988a 2.343a 2.4779a 22.120a 21.880a 6.6101a 7.714a 6.995a 6.830a 12.451a 12.281a 5.443a 9.281a 15.921a 6.145a 18.852a 18.075a 27.126a 52.881a 6.610a 7.714a

H-Test 73.447a 71.194a 20.806a 23.080a 16.428a 30.694a 26.4061a 39.456a 20.349a 118.508a 24.587a 38.217a 13.547a 26.217a 34.456a 18.120a 43.965a 48.120a 54.456a 78.145a 26.406a 39.456a


54

The results in the table 4.3b are based on two model

applied on each of the industry. One model is applied only

on the explanatory variables, whereas, the second model

utilized the interaction terms of explanatory variables and

financial liberalization index for Pakistan. The value of the F-

Test in all the models describes the acceptance or rejection

of the hypothesis of common constant. Significance of F

value rejects the null hypothesis that the constants are

common and the significance of H-Test Value confirms the

validity and application of Fixed Effect Method for this panel

data analysis in each of the manufacturing sector in Pakistan.

The analysis reveals that the exogenous variables explain

the change in endogenous variable by 0.2615 as described

by adjusted R-square in Model no 1 of the Textile sector of

Pakistan. Coefficient of size is 0.0522 which describes the

positive impact on investment of firms and beta coefficient

of interaction term of size and financial liberalization is

0.3861 which means that financial reforms increased the

investment as the size of the firm increases. Financial


investment of the firms at 1% level of significance

respectively. Beta coefficients of profitability without financial

liberalization index show insignificant results, whereas, the

interaction of profitability and index is positive. This shows

that after liberalization the profitability of firms help to make

investments by firms in the textile sector of Pakistan. The

results in the table show 0.0871 for tangibility and the result

of interaction of liberalization index with tangibility is 0.0105.

It means that financial reforms have reduced the reliance on

the asset tangibility for the acquisition of financial resources.

Beta coefficient of liquidity is -0.0935 and risk is -0.0649.

There is inverse relationship between the independent and

dependent variable. It explains that one unit change in these

variables will account for 9.35% and 6.49% negatively.


55

However, the interaction term of liquidity and risk is

significant at 10%. It implies that financial liberalization have

minimized the risk of investment. The interaction term of

growth and index is insignificant.

The results of the fixed effect models no 03 and 04 of the

food sector of Pakistan indicates that the exogenous

variables explain the change in endogenous variable by

37.38% as described by adjusted R-square. Coefficient of size

is 0.1489 which describes the positive impact on investment

of firms and beta coefficient of interaction term of size and

financial liberalization is 0.0491 which means that financial

reforms decreased the investment of food related

companies. Beta coefficients of profitability without financial

liberalization index is 0.2412, whereas, the interaction of

profitability and index is positive. This shows that after

liberalization the investment of the firms is reduced on the

basis of profitability in the food sector of Pakistan. The

results in the table show 0.5895 for tangibility and the result

of interaction of liberalization index with tangibility is 0.3218.

It means that financial reforms have reduced the reliance on

the asset tangibility for the investment in food sector of

Pakistan. Beta coefficient of liquidity is -0.1255 and risk is -

0.1734. There is inverse relationship between the

independent and dependent variable. It explains that one

unit change in these variables will account for 12.55% and

17.34% negatively. However, the interaction term of liquidity

and risk is significant at 10%. It implies that financial

liberalization have minimized the risk of investment. The

interaction term of growth and index is insignificant.

The results of chemical and pharmaceutical sector

highlight that independent variables bring the change in the

investment of the firm by 0.5333 as described by adjusted R-

square. Coefficient of size is 0.1489 which describes the

positive impact on investment of firms and beta coefficient


56

of interaction term of size and financial liberalization is

0.3236 which means that financial reforms increased the

investment as the size of the firm increases. Financial



respectively. Beta coefficients of profitability without and

with financial liberalization index show positive results and

the values are 0.4357 and 0.3875. Tangibility is insignificant

whereas, the result for tangibility after interaction of

liberalization index is 0.3102. It means that financial reforms

have increased the requirement of tangible assets for making

investments in chemical and pharmaceutical industry of

Pakistan. Beta coefficient of liquidity is -0.2853 and risk is -

0.2755. There is inverse relationship between the

independent and dependent variable. It explains that one

unit change in these variables will account for 28.53% and

27.55% negatively. However, the interaction term of liquidity

is significant at 1% and risk is significant at 10%. It implies

that financial liberalization have minimized the risk of

investment. The interaction term of growth and index is

significant at 1% level.

The results of fixed effect models of Non Metallic mineral

sector foreshadow that all variables will bring about 0.5913

as described by adjusted R-square. Coefficient of size is

0.3506 which describes the positive impact on investment of

firms and beta coefficient of interaction term of size and


reforms increased the investment as the size of the firm

increases. Financial Liberalization has significant positive

effect on the investment of the firms at 10% level of

significance respectively. Beta coefficients of profitability

without financial liberalization index show negative results,

whereas, the interaction of profitability and index is

insignificant. This shows that after liberalization the


57

profitability of firms is not the determinant of investment in

Non Metallic Manufacturing sector of Pakistan. The results in

the table show 0.2904 for tangibility and the result of

interaction of liberalization index with tangibility is 0.2439. It

means that financial reforms have reduced the reliance on

the asset tangibility for the acquisition of financial resources.

Beta coefficients of liquidity and risk are insignificant without

interaction of liberalization. The beta coefficient of risk and

liberalization is -0.1538 which means that after financial

liberalization risk of other manufacturing firms have inverse

relationship. If risk is higher the investment is reduced by

15.28% in this sector. However, the interaction term of

liquidity and risk is insignificant. It implies that financial



The results of motor vehicle auto parts sector explain the

change in endogenous variable by 0.6117 as described by

adjusted R-square. Coefficient of size is 0.0290 which

describes the positive impact on investment of firms and

beta coefficient of interaction term of size and financial

liberalization is 0.0589 which means that financial reforms

increased the investment as the size of the firm increases.

Financial Liberalization has significant positive effect on the


respectively. Beta coefficients of profitability without financial

liberalization index show negative results, whereas, the

interaction of profitability and index is positive. This shows

that after liberalization the profitability of firms help to make

investments by firms in the motor vehicle and auto parts

sector of Pakistan. The results in the table show 0.4171 for

tangibility and the result of interaction of liberalization index

with tangibility is 0.2227. It means that financial reforms have

reduced the reliance on the asset tangibility for the

investment and firms are investing in financial assets rather


58

that fixed assets. Beta coefficient of liquidity and risk are

insignificant, whereas the interaction terms of both the

variables with liberalization index are also insignificant. It

means that in motor vehicle and auto parts sector risk and

liquidity are not the determinants of investment even after

financial liberalization. The interaction term of growth and

index is insignificant.

The fuel and energy sector show a change in adjusted R

square of 0.4455. It means that all the independent variables

will bring about 44 percent change in the investment of the

any firm in this sector of Pakistan. Coefficient of size is

0.2625 which describes the positive impact on investment of

firms and beta coefficient of interaction term of size and


reforms increased the investment as the size of the firm

increases. Financial Liberalization has significant positive

effect on the investment of the firms at 1% level of

significance respectively. Beta coefficient of profitability

without financial liberalization index is 0.5291 and is

significant at 1% level, whereas, the interaction of

profitability and index is positive with beta value 0.6151. This

shows that after liberalization the profitability of firms help

to make investments by firms in the fuel and energy sector

of Pakistan. The results in the table show 0.1702 for

tangibility and the result of interaction of liberalization index

with tangibility is 0.2042. It means that financial reforms have

increased the effect of asset tangibility on the investment of

firms in fuel & energy sector. Beta coefficient of liquidity is -

0.1921 and risk is insignificant. There is inverse relationship

between the liquidity and investment. It explains that one

unit change in this variable will account for 19.21%

negatively. However, the interaction term of liquidity, risk

and growth are insignificant.


59

However, in communication and transport sector analysis

indicates that independent variables explain the change in

dependent variable by 39.5% in model 75 whereas Adjusted

R-square of model 76 is higher which has the explanatory

power 67.93% in explaining the dependent variable.

Coefficient of size describes that 1% change in size would

cause the change in investment by 5.46% whereas the

liberalization lever up this relation to 6.24%. Profitability has

the negative impact on the investment which shows that in

communication and transport section firms are distributing

the major portion of profit among shareholders and not

making investment to expand its operation. The coefficients of

the tangibility in both models are insignificant. The beta

coefficient of liquidity is -.4054 which means that 1% increase

in liquidity will bring the negative change in investment by

40.54%, these results describe the tradeoff between liquidity

and investment. Risk is insignificant in model 75 whereas the

beta coefficient of Risk in Model 76 is -0.1448, which shows

that 1% increase in Risk would impact negatively on

investment by 14.48%. Financial liberalization pushes up the

level of investment in this sector which may be verified from

the coefficients of growth. Without interaction term of

financial liberalization growth has impact by 15.09% whereas

in model 76 this impact is increased to 36.28%.

The analysis indicates that independent variables explain

the change in dependent variable by 82.49% in model

15whereas Adjusted R-square of model 16 is higher which

has the explanatory power 87.12% in explaining the

dependent variable in Paper Products Sector in Pakistan.

Coefficient of size describes that 1% change in size would

cause the change in investment by 8.32% whereas the

liberalization lever up this relation up to 11.25%. Profitability

has the negative impact on the investment which shows that

in paper product sector firms are distributing the major


60

portion of profit among shareholders and not making

investment to expand its operation. The coefficients of the

tangibility in both models are positive and significant. The

interaction of tangibility and liberalization index increased

the effect of tangibility on investment by 11.28%. The beta

coefficient of liquidity is -0.1610 which means that 1%

increase in liquidity will bring the negative change in

investment by 16.10%, these results describe the tradeoff

between liquidity and investment. Risk in both the models is

significant at 5% and 1% level of significance, whereas the

beta coefficient of Risk and liberalization index is -0.0624,

which shows that 1% increase in Risk would impact

investment negatively by 6.24%. Financial liberalization did

not help to increase the level of investment in this sector

which is evident from the values of growth.

The electrical machinery sector of Pakistan shows that the

explanatory variables can bring about 72.59% change in

dependent variable without interaction of financial

liberalization whereas Adjusted R-square of model 18 is

higher which has the explanatory power 77.78% in explaining

the dependent variable. Coefficient of size describes that 1%

change in size would cause the change in investment by

71.12% whereas the liberalization reduced this relation up to

61.12%. Profitability has the positive impact on the

investment which shows that in electrical machinery section

firms are retaining the profits for future projects and

expansion. The coefficients of the tangibility in both models

are significant. Financial liberalization increased the

requirement of asset tangibility for investment in this sector

which is evident from the beta value 0.1082. The beta

coefficient of liquidity is -0.2313 which means that 1%

increase in liquidity will bring the negative change in

investment by 23.13%, these results describe the tradeoff

between liquidity and investment. Risk is insignificant in


61

model 87 whereas the beta coefficient of Risk in model 88 is

-0.1128, which shows that 1% increase in Risk would

negatively impact on investment by 11.28%. Financial

liberalization pushes up the level of investment in this sector

which may be verified from the coefficients of growth.

Without interaction term of financial liberalization growth

has impact by 4.50% whereas in model 88 this impact is

increased up to 11.02%.

The analysis of refined petroleum products show that the

exogenous variables explain the change in endogenous

variable by 0.6603 as described by adjusted R-square.

Coefficient of size is 0.0238which describes the positive

impact on investment of firms and beta coefficient of

interaction term of size and financial liberalization is 0.2124

which means that financial reforms increased the investment

as the size of the firm increases. Financial Liberalization has

significant positive effect on the investment of the firms at 5%

level of significance. Beta coefficients of profitability without

and financial liberalization index show negative results. It

means that firm in this sector are not making investments in

real assets they may be investing in financial assets. The

results in the table show insignificant results for tangibility

without interaction of liberalization. However, after interaction

of index and tangibility it shows positive relationship with the

beta value of 0.3321. Beta coefficient of liquidity is -0.2781

and risk is -0.1289. There is inverse relationship between the

independent and dependent variable. It explains that one unit

change in these variables will account for 27.81% and 12.89%

negatively. However, the interaction term of liquidity and risk

is significant at 1%. It implies that financial liberalization have

minimized the risk of investment. The interaction term of

growth and index is insignificant.

The analysis of other manufacturing sector indicates that

the exogenous variables explain the change in endogenous


62

variable by 0.5913 as described by adjusted R-square.

Coefficient of size is 0.3506 which describes the positive

impact on investment of firms and beta coefficient of

interaction term of size and financial liberalization is 0.2630

which means that financial reforms increased the investment

as the size of the firm increases. Financial Liberalization has

significant positive effect on the investment of the firms at

10% level of significance respectively. Beta coefficients of

profitability without financial liberalization index show

negative results, whereas, the interaction of profitability and

index is insignificant. This shows that after liberalization the

profitability of firms is not the determinant of investment in

the other manufacturing sector of Pakistan. The results in the

table show 0.2904 for tangibility and the result of interaction

of liberalization index with tangibility is 0.2439. It means that

financial reforms have reduced the reliance on the asset

tangibility for the acquisition of financial resources. Beta

coefficients of liquidity and risk are insignificant without

interaction of liberalization. The beta coefficient of risk and

liberalization is -0.1538 which means that after financial

liberalization risk of other manufacturing firms have inverse

relationship. If risk is higher the investment is reduced by

15.28% in this sector. However, the interaction term of

liquidity and risk is insignificant. It implies that financial



Discussion

The present research is conducted to find out the impact of

financial liberalization reforms along with firm-specific factors

(size, profitability, tangibility, liquidity, risk, and growth) on the

investment of manufacturing listed firms in Pakistan Stock


63

Exchange. To investigate, the study developed financial

liberalization index based on the reforms from 1991 to 2014.

The reforms were subdivided into nine categories as per the

financial sector progress review report of State Bank of

Pakistan. To meet the objectives of the study analyses were

brought down to various sectors of manufacturing firms that

include Textiles, Food, Chemicals, Other manufacturing, Motor

Vehicle, Fuel & Energy, Communication, Refined Petroleum,

Paperboard, and Electrical Machinery. Panel data regression

analyses were performed and fixed effect models were applied

on the data set.

In nutshell, on the basis of firm-level factors and their

interaction with liberalization index, the results highlight the

favorable impact of financial reforms on the investment of

Manufacturing listed in Pakistan Stock Exchange. However,

results which have been extracted from the analyses show

that there is significantly different impact of financial

liberalization on the level of investment among sectors.

Results show that textile sector is benefited at the most from

the financial liberalization in terms of increase in investment

and it is evident from the interaction coefficients of firm

specific factors and financial liberalization. The coefficient

values of size, profitability, liquidity, and risk favorably affect

investment level of the firm after liberalization of the

financial system in Pakistan. The coefficient of index and size

is 0.3861, profitability is 0.1041, liquidity is -0.0491, and risk is

-0.0214. Among other sectors, financial liberalization has also

helped to increase the investment in refined petroleum

products, electrical machinery, and chemical and

pharmaceutical sectors. This is also evident from the analyses


64

that the interaction of profitability, risk, and tangibility

affected favorably on the level of firm investment in these

sectors. On the other side, investment level of food, non-

metallic minerals, other manufacturing, and paper products

did not improve much from financial liberalization reforms in

Pakistan. Some sectors provided evidence of mixed results

which includes fuel & energy sector and motor vehicle &

auto parts sector. The results of this research are in

consonance with the work of Koo & Shin (2004), Galindo et

al., (2005), Ghosal & Nair (2009) and Onwuka (2014) that

financial liberalization has divergent effects on the firm-level

investment in listed large scale manufacturing firms.

Policy Implications and Future Research Directions

The results of the present study suggest that there is still

room for improvement. On the basis of the findings the

following recommendations can be drawn. It is proved that

financial liberalization has an impact on the investment of

manufacturing sector in Pakistan. Therefore, policy makers

should keep an eye on improving financial system so that

benefits of financial liberalization become constant

phenomena for the manufacturing sector. The results further

show that the effect of financial liberalization is not uniform

across various sectors. Therefore, sector specific reforms may

be introduced in refined petroleum products, non metallic

minerals, and food sectors considering their special needs.

The study also recommends that Food sector needs focus in

terms of investment to get benefit of financial liberalization.


65

Communication and transport sector requires attention

towards liquidity, risk, and growth to achieve benefit in terms

of improving their investment function.

Future Research Directors

Research open up avenues to conduct future research and

none of the research is ultimate. Future research may be

directed to find out more insight of financial liberalization

hypothesis by conducting extensive interviews from the

financial manager or chief executive officer of the

manufacturing sector firms. The interviews may be targeted

to know better perceptions of the finance manager/chief

financial officer and CEO views about the benefits and

drawbacks of three levels of financial liberalization i.e., capital

account, stock market, and bank liberalization.

Future research may also segregate the data on the basis

of firms having affiliation with large business groups and non

business group. The analysis may be conducted to explore,

whether firms with business group affiliate have better

access to funds or non business group affiliated firms.

Another dimension for future research could be to

categorize firms on the basis of political connection of

CEO/Finance Manager/Senior Management. This may unveil

some more truths about the level of firm investment.


66

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35227.

Qazi Mohammad Ahmed*

Muhammad Mustafa Raziq**

Abeera Babar Goreja***

The Impact of Consumer Beliefs on

Consumers’ Attitude: A Social Media

Advertising Perspective

ABSTRACT

This study examines the role of consumer beliefs on the consumers’ attitude towards social media advertising. The rationale behind this research is to learn how different consumers’ beliefs influence the consumers’ attitudes towards social media advertising and the virtual audience in the development of their behaviors towards the online content available. In this study, the consumer belief is reflected by: infotainment, intrusiveness and integrity. Data is collected through an online survey developed in Google Docs. The target population comprises of 350 college and university level students. Data are analyzed through multiple regression technique using the SPSS tool. Results show that infotainment and integrity have a significant positive impact on consumer attitudes while intrusiveness has no significant impact on the consumer’s attitudes. The results are discussed and implications for the management practice and policy-makers are made.

Keywords: Social Media Advertising, Consumer Beliefs,

Attitudes, Infotainment, Intrusiveness, Integrity.

* PhD Scholar, COMSATS Institute of Information Technology (CIIT),

Senior Lecturer, Department of Management Sciences, Bahria

University, Islamabad Campus **

Assistant Professor, COMSATS Institute of Information Technology

(CIIT), Department of Management Sciences, Islamabad ***

MBA Student, Department of Management Sciences, Bahria

University, Islamabad


78

Introduction

The recent expansions in the field of internet-based

technologies have generated a far-reaching impact on the

psycho-demographic & socio-economic nature of businesses,

the content generated and the engagement of participants on

the internet. The new jargon named ‘Social Media’ has

received an overwhelming acceptance since the day of its

inception. Kaplan and Haenlein (2010)define it as a group of

internet based applications that have emerged from the

ideological and technological foundations of Web 2.0, serving

as a medium for the formation and interchange of User

Generated Content (UGC).

A leading social media platform is Facebook with more

than a billion monthly active users (Statista, 2016). YouTube

estimates a billion monthly active users with over a 4 billion

videos watched a day (Hub Spot & Social Bakers, 2016).

Twitter has a customer base of 320 million monthly active

users with around 500 million Tweets sent per day. WhatsApp

and Instagram have an active user-base of 900 million and

400 million respectively (Social Bakers, 2016). Instagram’s

active consumer base has crossed both Twitter and Pinterest,

recording more than 80 million photos and 3.5 billion posts

per day. Moreover, LinkedIn (100 million), Snap Chat (200

million) and Google+ (400 million) active users are also well

recognized social media platforms (Mawhinney, 2017).

Google, the search engine giant approximately earns US$ 20

Billion a year from advertising. This is much greater than the

prime time revenues of the renowned channel networks of

NBC, CBS, ABC and FOX combined (Social Bakers, 2016). It is

expected that the digital ad spending would effortlessly

Qazi Mohammed Ahmed, Muhammad Mustafa Raziq & Abeera Babar Goreja

79

surpass the TV ad spending by 2017 due to an ever increasing

consumer base on a daily basis (eMarketer, 2016).

Despite the massive and incredibly increasing customer

base of these businesses, some critical questions remain

unexplored. For example, it is less known as to what

determines the attitude of the online users towards social

media. Social media has become perhaps the most popular

mode of communication in the past few years, especially

among the youth. Research work on social networking

advertising (SNA) not only needs to be conceptually

evaluated but empirically tested. Knoll (2015), for example,

identifies seven emerging research areas for social media

advertising research, and from amongst the seven themes,

the top two are: Use of advertising in social media and, the

consumers’ attitudes towards and exposure to advertising.

Studies on social media and online advertising in general

show that the dimension, consumers’ attitude towards social

media advertising (CATSMA), is an essential determinant of

the social media effectiveness (Chu, Kamal, & Kim, 2013;

Ducoffe, 1996; Ducoffe & Curlo, 2000; Pollay & Mittal, 1993).

Consumers with positive attitudes towards advertising show

a favorable response to the advertisements, while those with

negative attitudes show an unfavorable response (Pollay &

Mittal, 1993; Wang & Sun, 2010a, 2010b; Wolin, Korgaonkar,

& Lund, 2002). Based on this notion, we examine the role of

consumers’ beliefs based on their attitudes towards

advertising and through a social media lens extend the

existing debate on consumers’ beliefs and attitudes.

In the subsequent sections, we provide an overview of

the literature on consumer’s attitudes and their belief

constructs. This is followed by conceptual development,

where we link the concepts, develop hypotheses and finally


80

present a theoretical model for empirical testing. We then

present the methodology section followed by the results

section. Finally, discussion& implications, limitations & future

directions and conclusions from the study are presented.

Literature Review

Consumer Attitudes:

A belief is a descriptive thought that a person holds about

something. An attitude is a person’s enduring favorable or

unfavorable emotional feeling, evaluation and action

tendencies(Kotler & Keller, 2009). Reviewing it, the beliefs

that are generated about social media advertising highlight

its attributes like social media advertising is informative.

Adding on to it, attitudes towards social media advertising

are evaluations that reflect its perceived benefits (e.g. In

general, I consider social media advertising to be a good

thing). This viewpoint has also been effectively applied by

Chi (2011); Jung, Shim, and Jin (2015) Wang and Sun (2010a)

for online and social media advertising.

Over the period of time, as consumer awareness rose up,

Shavitt, Lowrey, and Haefner (1998) reported that public

attitudes towards advertising turned out be highly favorable.

The successive works of Mehta (2000); Pyun and James

(2011) Jin and Lutz (2013)seconded the favorable consumer

attitudes towards different forms and mediums of

advertising. The study of social media advertising is still in

the iterative stage(Taylor, Lewin, & Strutton, 2011) and there

is a dire need of a sound pragmatic investigation into

consumer attitudes towards social media advertising(Knoll,

2015; Nevarez & Torres, 2015).


81

Consumer Beliefs

They are a measure of a consumer’s cognitions and

attributes about a specific entity or a brand(Solomon,

2014).The attitudes emerge from beliefs and they exist at

different cognitive levels. In this manner, a consumer’s belief

about advertising is an antecedent of his attitude towards

advertising(Brackett & Carr, 2001; Ducoffe, 1996; Ducoffe &

Curlo, 2000; Pollay & Mittal, 1993).The research study

investigates three consumer beliefs i.e. Infotainment,

Intrusiveness & Integrity showing an impact on consumer

attitudes towards social media advertising. It extends the

model proposed by Pollay and Mittal (1993) and tests it

within the social media advertising context. So, applying

Pollay & Mittal’s (1993) framework, we investigate the

relationship between consumer beliefs and their underlying

attitudes. These three constructs have been considered as

the most significant and robust dimensions in evaluating

consumer’s motives, values and attitudes(Eighmey &

McCord, 1998; Liu, Sinkovics, Pezderka, & Haghirian, 2012;

Luo & Xueming, 2002; Okazaki, 2004).

Infotainment: Product Information describes the role of

advertising as an information reflector and a significant

indicator in portraying market efficiencies (Wang & Sun,

2010a). In simple terms, product information is a personal

belief factor which shapes consumer opinions about the

instructive, educational and informative character of

advertising(Pollay & Mittal, 1993; Wang & Sun, 2010a). The

higher degree of product information depicted through

advertising in general also results in enriched and effective

decision making(Alwitt & Prabhaker, 1992; Pyun & James,

2011). Additionally, most of the other researchers also


82

validated advertising as a valuable source of product

information and found it as a major predictor of forming

attitudes towards advertising (Korgaonkar, Karson, & Akaah,

1997; Pollay & Mittal, 1993; Schlosser, Shavitt, & Kanfer,

1999). It was also considered as a significant consumer value,

motive and a belief construct when evaluating consumer

attitudes towards online and social media advertising(Dao,

Le, Cheng, & Chen, 2014; Jung et al., 2015; Taylor et al., 2011;

Wolin et al., 2002).

The second portion of Infotainment referred to as

Entertainment states advertising becoming a source of

pleasure or joy upon exposure. Also referred to as hedonism,

there is no doubt that advertisements can touch our

emotions, look quite appealing, portray funny events, fosters

likeability and be amusing and nostalgic by nature (Greyser

& Bauer, 1966; Pollay & Mittal, 1993; Pyun & James, 2011).

Entertainment has been studied as a belief construct in

evaluating consumer attitudes towards advertising in general

(Greyser & Bauer, 1966; Shavitt et al., 1998), television

advertising (Alwitt & Prabhaker, 1992; Mittal, 1994), sports

advertising (Pyun & James, 2011) and online advertising

(Wang & Sun, 2010a; Wolin et al., 2002). Moreover, it has

also been tested as a significant belief, motive and a value

construct when examining consumer attitudes towards social

networking advertising(Dao et al., 2014; Jung et al., 2015;

Taylor et al., 2011). Based on the extant literature evaluated,

it is hypothesized that:

H1: There is a significant positive relationship between

infotainment and consumers’ attitude towards social media

advertising (CATSMA)


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Invasiveness:

This belief dimension was referred to as annoyance/ irritation

(Bauer & Greyser, 1968). They classically defined annoying

ads as “...ads that irritate you. They may be annoying because

of what they say or how they say it. They may annoy you

because they are around so much, or because of when and

where they appear. They may be other reasons for ads to be

annoying – the main thing is that they bother or irritate

you”(Bauer & Greyser, 1968, p. 182).

A series of empirical research studies have been

conducted to test the impact of invasiveness as a belief

construct influencing consumer attitudes towards advertising

in general. The findings have clearly reflected that the

existence of invasiveness has been one of the significant

predictors of negative attitudes towards advertising (Aaker &

Bruzzone, 1981, 1985; Alwitt & Prabhaker, 1992; Ducoffe,

1996; James & Kover, 1992; Mittal, 1994). Further Pyun and

James (2011) has considered irritation as an important belief

dimension with a negative impact on consumer attitudes

towards sports advertising. In the concrete research studies

conducted byJung et al. (2015)and Taylor et al. (2011)on

social networking advertising (SNA), an add was considered

invasive when it interfered with their goal oriented behavior

and resulted in negative attitudes and perceptions. Under

the light of the academic literature discussed above, the

proposed study hypothesizes that:

H2: There is a significant negative relationship between

invasiveness and consumer’s attitude towards social media

advertising (CATSMA)


84

Integrity:

Advertising in general can also be perceived to be

intentionally misleading, confusing, trivial or lacking adequate

information. This belief dimension has been derived as

Falsity/No Sense (Pollay & Mittal, 1993; Pyun & James,

2011)and Credibility (Wang & Sun, 2010a)in the renowned

research literature. The notion that advertising can turn out

to be deceptive and skeptical has been studied in relation to

the attitudes that develop towards various media tools and

in general too (Alwitt & Prabhaker, 1992; Greyser & Bauer,

1966; Larkin, 1977; Pollay & Mittal, 1993; Schlosser et al.,

1999; Shavitt et al., 1998). On the other hand, Pollay and

Mittal (1993)also found a highly significant and negative

relationship between Falsity/No Sense and attitude towards

advertising in general (b= -0.15 for collegians and b= -0.36

for householders).

Later in the research study conducted by Wang and Sun

(2010a), Credibility was observed as the second most

important predictor in defining consumer attitudes towards

online advertising. Generally, when people regard online

advertising as trustworthy, they tend to develop more

positive attitudes towards it. This result is again consistent

with Wolin et al. (2002), that Falsity/No Sense has a negative

impact on attitude towards online advertising. The element

of relevance and credibility in an advertisement is considered

vital when consumers have to make decisions on the basis of

uncertain information(Okazaki, Katsukura, & Nishiyama,

2007). Based on the literature evaluated, the study

hypothesis that:

H3:There is a significant positive relationship between

credibility and consumers’ attitude towards social media

advertising (CATSMA).


85

Theoretical Framework

There are three independent variables and one dependent

variable acknowledged in this current research. The study

intends to test the effect of each of the independent

variables on the dependent variable. The three independent

variables include infotainment, intrusiveness and integrity.

The dependent variable is consumers’ attitude towards social

media advertising (CATSMA).

Figure 1: Conceptual Framework

Methodology

Participants: The research study focuses on the ‘Young

Adults’ (aged:18-29) and the ‘Mid Age Segment’ (aged: 30-

44) of Pakistan. Pakistan engulfs a unique socio-cultural

composition with two-third of its population residing below

the age of 30 (Euromonitor, 2016).College and University

students were deemed to be an appropriate sample for the

study with students of Masters and Doctoral studies having

mature ages. These young consumers depict greater energy,

effort and motivation towards social media (Brosdahl &

Infotainment

Intrusiveness

Integrity

Consumer s’ Attitude Towards Social Media

Advertising (CATSMA)


86

Carpenter, 2011). They are also considered amidst the first

generations to have truly tasted the digital environment and

the role of information technology has encircled their

personal and working lives (Wesner & Miller, 2008). Earlier

studies on social media have also taken university/college

students as their sampling frame when evaluating consumer

behavior(Dao et al., 2014; Jung, Shim, Jin, & Khang, 2016;

Nevarez & Torres, 2015).

Sampling Technique: The study has applied Convenience

Sampling in selecting its target subjects/audience. Under the

umbrella of this sampling technique, Kardes (1996)and Lucas

(2003) have argued that taking college students would not

result in biased results if the theory tested is based on

human psychology (Polly and Mittal’s model is based on

consumer beliefs and attitudes). Earlier, Berkowitz and

Donnerstein (1982) also propagated that it would also add to

the generalizability of the outcomes for the non-student

populations. Moreover, convenience sampling has been

considered as a highly popular sampling technique when

evaluating consumer responses towards social media

advertising (Lee & Hong, 2016; Muk, Chung, & Kim, 2014;

Zhang & Mao, 2016).

Questionnaire Design: A self-administered questionnaire

was used to collect the data. The questionnaires were

distributed electronically (emailed) in the major colleges

&universities of the capital city, named Bahria College, Bahria

University, Comsats Institute of Information Technology

(CIIT) and OPF College. Google Docs was used as a tool for


87

the online survey. A total of 340 students took part and 288

usable responses were employed in the data analysis after

eliminating the incomplete responses.

Measures: The scale for the first construct (infotainment) was

adopted from the work of Ducoffe (1996)&Liu et al. (2012).

The scale for the second construct (instrusiveness) was

adopted from the research works of Liu et al. (2012)&Taylor

et al. (2011).The third construct (Integrity) was measured

through the scales adopted fromDao et al. (2014), Mackenzie

and Lutz (1989)&Taylor et al. (2011). The fourth construct i.e.

consumers’ attitude towards social media advertising

(CATSMA) was measured from the scales adopted from

(Nevarez & Torres, 2015) &Taylor et al. (2011). All the

constructs were measured on a 5-Point Likert scale ranging

from (1= ‘Strongly Disagree’ and 5= ‘Strongly Agree’). The 5-

Point Likert scale has been extensively applied by Wang and

Sun (2010a), Taylor et al. (2011) and Chu, Kamal, & Kim

(2013)in evaluating consumer responses towards online and

social media advertising.

Data Analysis: The proposed study would incorporate

Statistical Package for the Social Science (SPSS) v. 23 to

perform thorough reliability tests for the associated items of

measurement. To evaluate the hypothesized relationships

amidst the constructs, Pearson correlation analysis has been

carried out accompanied by a multi-collinearity test. Finally, a

Regression analysis has also been undertaken for confirming

the extent of effects of infotainment, intrusiveness and


88

integrity on consumer attitudes towards social media

advertising (CATSMA).

Results

Respondent’s profiling: The table below shows the number

of male respondents were 138 out of 288 which makes it

47.9% of the total sample size. The number of female

respondents was 150 out of 288, which makes it 52.1% of the

overall sample size.

Table 1: Gender Wise Distribution of Respondents

Frequency Percent Valid Percent Cumulative

Percent

Valid

Male 138 47.9 47.9 47.9

Female 150 52.1 52.1 100.0

Total 288 100.0 100.0

Table 2: Age Wise Distribution of Respondents

Frequency Percent Valid

Percent

Cumulative

Percent

Valid

18-24 100 34.7 34.7 34.7

25-34 87 30.2 30.2 64.9

35-44 53 18.4 18.4 83.3

45-54 48 16.7 16.7 100.0

Total 288 100.0 100.0

In Table 2, breakdown of the respondent’s age has been provided. Representation of the respondents age from 18-24 is 34.7%, from 25-34 is 30.2%, from 35-44 is 18.4% and from 45-54 is 16.7%. The table clearly depicts that majority of the


89

questionnaires filled represents our target sampling frame i.e. from 18-44 years of age (83.3%).

Table 3: Education Wise Distribution

Frequency Percent Valid

Percent

Cumulative

Percent

School/College 94 32.6 32.6 32.6

Undergraduate 91 31.6 31.6 64.2

Postgraduate 103 35.8 35.8 100.0

Total 288 100.0 100.0

Table 3 shows the breakdown of the respondent’s education. The school/college students represent 32.6% of the sample size, undergraduate students represent 31.6% and post-graduate students represent 35.8% of the sample size.

Reliability Analysis: The Cronbach's alpha is a measure of internal reliability and consistency between multiple scale measurements in a construct. According to literature, DeVellis (2016) propagated that the Cronbach’s alpha coefficient should be higher than 0.7 to be reliable and acceptable. On the other hand, Malhotra (2008) suggested that the cut of criteria for rejection of a construct should be 0.6 or lower. Table 4 below shows the alpha values of our constructs’ reliability.

Table 4: Cronbach's Reliability Summary

Construct Cronbach’s Alpha No of Items

Infotainment 0.882 11

Intrusiveness 0.765 6

Integrity 0.778 5

CATSMA 0.823 5


90

Table 4 shows that the alpha values of the four major

constructs; Infotainment (0.882), Intrusiveness (0.765),

Integrity (0.778) and Consumer Attitudes (0.823) are above

the minimum criteria of 0.7. Hence, it is concluded with

confidence that internal consistency is present between the

measurements of our variables.

Correlation Analysis: In general terms, correlation describes

the measure of relationship between the two variables with a

range of +1 to -1. A value of -1 stands for perfect negative

correlation, +1 stands for perfect positive correlation while 0

stands for no relationship between the variables (Sekaran &

Bougie, 2013). Evans (1996)discussed that a weak correlation is

present when the correlation coefficient between the

independent and dependent variable ranges between 0.01 to

0.39. Moreover, a strong correlation is present when the

coefficient value resides between 0.60 to 0.99 while a moderate

correlation is present between the value of 0.40 to 0.59.

Table 5: Pearson's Correlation Summary

Infotainment Intrusiveness Integrity CATSMA

Infotainment Pearson Correlation 1 -.281

** .367

** .637

**

Sig. (2-tailed) .000 .000 .000

Intrusiveness Pearson Correlation -.281

** 1 -.219

** -.225

**

Sig. (2-tailed) .000 .000 .000

Integrity Pearson Correlation .367

** -.219

** 1 .569

**

Sig. (2-tailed) .000 .000 .000

CATSMA Pearson Correlation .637

** -.225

** .569

** 1

Sig. (2-tailed) .000 .000 .000

**. Correlation is significant at the 0.01 level (2-tailed).

b. List wise N=287

Referring to Table 5, Infotainment (r= 0.637) has a strong

positive correlation and Integrity (r=0.569) has a moderate


91

correlation with consumer attitudes. On the other hand,

Intrusiveness (r= -0.225) has a negative correlation with the

dependent variable of the study. To address the problem of

multi-collinearity, the r-values between the two independent

factors should not be greater than 0.80(Garson, 2012). This is

totally non-existent in the study’s context as shown by the

Table 5. To further validate it, a multi-collinearity test has

also been applied shown by Table 6 below.

Table 6: Collinearity Diagnostics

Model Collinearity Statistics

Tolerance VIF

1 Infotainment .823 1.215

Intrusiveness .905 1.105

Integrity .851 1.176

Dependent Variable: CATSMA

Referring to Table 6, the Variance Inflation Factor (VIF) reflects

the value of the inflation in the standard errors associated

with a specific beta weight that is due to the presence of

multi-collinearity. The value of Variance Inflation Factor (VIF)

should ideally be less than 3 and the Tolerance should be

closer to the value of one i.e. greater than 0.1(Hair Jr, Black,

Babin, Anderson, & Tatham, 2010; Kennedy, 2003; Pan &

Jackson, 2008). Our results thus show that there is no

presence of multi-collinearity between the independent

variables of the research study.

Regression Analysis: It is applied to evaluate the

relationship between one dependent variable and one or


92

more independent variables. It actually measures the change

in the dependent variable which in this case is ‘CATSMA’,

caused by a change in the independent variables comprising

of infotainment, intrusiveness and integrity.

Table 7: Regression Model Summary

Model R R Square Adjusted R Square Std. Error of the

Estimate

1 .732a .535 .530 .55767

a. Predictors: (Constant), Integrity, Intrusiveness,

Infotainment

The table 7 depicts the values of R, R square and adjusted R

square. The value of R shows that how well the predictors

compute the final outcome. The R value is 0.732 showing

that 73% of the variation in the dependent variable has been

caused by the independent variable. The value of R square (a

more accurate prediction of multiple linear regression) shows

that 53.5% of the variation in the dependent variable has

been due to the presence of the study’s three predictor

variables. The value of R square is adjusted to attain how

much of the target sample justifies the whole population.

The adjusted R square value shows that 53% of the variation

in CATSMA is due to the presence of infotainment,

intrusiveness and integrity.


93

Table 8: ANOVA

Model Sum of

Squares

Df Mean

Square

F Sig.

1

Regression 101.405 3 33.802 108.689 .000b

Residual 88.011 283 .311

Total 189.416 286

a. Dependent Variable: CATSMA

b. Predictors: (Constant), Integrity, Intrusiveness,

Infotainment

The F statistic in Table 8 shows the overall significance of

our model and depicts that the regression equation fits the

data well. In the research study undertaken, the value of the

F statistic is 33.802 while the p value is less than 0.05, which

reflects that the results are highly significant(Field, 2013).

This means that the independent variables have truly

represented the dependent variable and the regression

equation is statistically significant. Moreover, a one-way

ANOVA analysis was also undertaken to confirm if there are

any statistical significant differences in attitudes towards

social media advertising between different age groups.

Both parametric and non-parametric tests were applied

along the four dimensions of the age groups and no

significant differences were found. This clearly indicates that

advertising over the social media has a significant impact

on all age groups.


94

Table 9: Coefficient Application

Model

Unstandardized

Coefficients

Standardized

Coefficients

T Sig.

B Std. Error Beta

1

(Constant) -.024 .271 -.090 .928

Infotainment .583 .053 .494 11.071 .000

Intrusiveness -.001 .046 -.001 -.031 .975

Integrity .400 .045 .387 8.807 .000

a. Dependent Variable: CATSMA

Table 9 shows that the independent constructs of

Infotainment (p=0.000, t=11.071, b= 0.583) and Integrity (p=

0.000, t= 8.807, b=0.400) possess a significant influence on

consumer attitudes as their p values and t values are below

0.05 and above 2.00 respectively(Field, 2013). The beta values

also show that their relationship with the dependent variable

is positive. On the other hand, integrity (p=0.975, t=-0.31,

b=-0.01) shows a statistically insignificant relationship with

consumer attitudes towards social media advertising. Its p

value is greater than 0.05 and its t value is less than the

threshold of 2.00.

Discussion & Implications

Social media is an area of growing interest for the academics,

uses and policy makers. Our results show that advertising

through social media has a significant impact on the

consumers’ beliefs and their attitudes. Our findings are

consistent with the earlier studies (for example Dao et al.,

2014; Hanna, Rohm, & Crittenden, 2011; Mangold & Faulds,

2009; Schultz & Peltier, 2013) regarding social media

advertising.


95

Our results provide further support to former studies. For

example, the internal consistency of the items was similar

with the study of Liu et al. (2012)on the role of consumer

beliefs on attitudes towards mobile advertising. The

relationships of infotainment, integrity, and invasiveness with

regards to CATMSA show consistency with Dao et al. (2014),

Muk et al. (2014) andTaylor et al. (2011). Regarding

significance of the hypothesized relationships, both

infotainment and integrity had a significant positive impact

on CATMSA showing similar results asChu et al. (2013).

However, with intrusiveness, the non-significant impact on

consumer attitudes contrasts the findings of Taylor et al.

(2011). This adds to the contribution of our study within the

Pakistani context. It shows that the element of invasiveness/

irritation does not interfere with the goal oriented behaviors

of the young & mid age Pakistani consumers and does not

result in negative attitudes towards social media advertising.

In the light of practical insights of the research study, it

would benefit the multinationals which have plans to

advertise and sell their products through the social media in

Pakistan. It would also assist the policy makers and

advertising mangers to understand the emerging needs,

dynamic desires and volatile expectations of the young

consumers which reside within traditional and plural cultures.

Moreover, the businesses would also be able to approach

their target segment through personalized communications

on the social media which will not only be cost effective but

more sustainable.

Limitations and Future Research Directions

As like all other researches, this study is not free from

limitation. As the sample drawn is based on convenience,

there are always issues pertaining to the generalizations one


96

is making from the sample to the population under study.

Moreover, consumer behavior over the social media is still in

an iterative phase, a cross-sectional design is not enough to

capture the true change or evolution. For attaining greater

precision, a longitudinal study may provide better results

into emerging consumer responses and their perceptions

online. Futuristic studies also need to incorporate context

based variables, such as aesthetics & functionality of virtual

communities and user based variables, such as need for

creativity & self-efficacy to attain useful insights about a

virtual user. Additional moderating variables could also be

added like age and gender to attain demographic

comparisons within the sampling frame.

Conclusion

This paper examined the role of consumers’ beliefs and

attitudes by extending the model of Pollay and Mittal (1993)

within the context of social media advertising. Specifically, it

evaluated the role of infotainment, intrusiveness and

integrity on consumers’ attitude towards social media

advertising. The results showed that both infotainment and

integrity had a significant influence on consumers’ attitude

while intrusiveness depicted statistically insignificant results.

The research contributions thus reflected that the young and

middle age segment of Pakistan seeks greater information,

better entertainment and enhanced credibility on the social

networking sites. Moreover, intrusiveness is not a significant

predictor of their attitudes and does not inhibit their goal

oriented behaviors. This research paper provides strategic

guidelines to the policy makers and marketing managers

over how they can build engaging promotional content

through social media.


97

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Priya Avais*

Muhammad Shaban**

Nadia Anwar***

A Meta-functional Analysis of Baba

Bulleh Shah’s Kaafi:

Ranjha Ranjha Kardi Hun Mein Apey

Ranjha Hoi

ABSTRACT

This study undertakes a thematic analysis of Bulleh Shah’s

seminal kaafi which is a genre of poetry. Kaafi is a poem on

devine attribution and sometimes mystic beliefs. This name

kaafi is borrowed from the Persian word called Kafaya

meaning rhyme. This kaafi, Ranjha Ranjha kardi hun main

apey Ranjha hoi will be studied through the three meta-

functionsie ideational, interpersonal and textual developed

within the theoretical parameters of Systemic Functional

Grammar.

This study reveals that each clause of the kaafiis enriched

with one of the meta-functions offering multiple meanings for

interpretation. The selected kaafi expresses spiritual

connections through emerging themes such as poetic voice,

self reliance, universality, transformation and displacement.

* Assistant Professor, Applied Linguistics Department Kinnaird College

for Women. Lahore **

Associate Professor, Department of English Language and Literature

UMT Lahore. ***

Assistant Professor ,Department of English Languages, UMT Lahore.


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Hence the study supplements the meta functional analysis

with a scientific account of textual and clausal analyses.

Keywords: Meta Functions, Systemic Functional Grammar,

Ideational, Interpersonal and Textual Functions, Kaafi, Baba

Bulleh Shah, Loi, Chaddar, Language Functions, Multiple

meanings.

Introduction

To date only a few researchers (e.g. Bilal 2012 and Olusanya

2013)have conducted studies on meta-functions of language

with reference to literary and media texts. According to

Fontaine (2013),explicates that a poetic narrative focuses on

defining human experiences and revolves around certain

social relations essential for a shared sense of human

activity. And unless the mythographer has imitated studio

technicians, producing a decontextualized voice that is in

some ways the auditory equivalent of a carefully edited and

printed text on a clean white page, the information on the

tape is not limited to what that voice sounded like at the

moment it left the lips. In this way it enables a reader to

excavate not only the realities of his/her mundane existence

but also those phenomena which reside at the level of super-

consciousness (according to Yogi 2009), super consciousness

means a state of heightened awareness. The multi-

dimensional aspects of meanings in the Sufi narratives of

Bulleh Shah are also characterized by the impulse he

achieved through divine intervention to discover the

meanings of life. In this paper an attempt has been made to

explore Bulleh Shah’s kaafi Ranjha Ranjha kardi hun mein

apey ranjha hoi in order to understand both the social

Priya Avais, Muhammad Shaban & Nadia Anwar

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relations and spiritual experiences involved through the

metafunctions.

Bulleh Shah is one of the most time honored sufi poets

of the eighteenth century (1680-1758). According to Sheik

(2004) Bulleh Shah devoted his entire life to producing sufi

poetry which has often been a subject of investigation e.g.

authors like Nasir (1916) Thomas (2008), Waldo (2008), and

Ivan, (2009) has challenged Bulleh Shah’s religious identity

with reference through historic records. On the other hand,

many researchers such as Chopra (1999), Peterson (2013),

and Bhatti (2015) believe that supposedly simple words like

dheedo (reflection), loi (cape), chaddar (sheet), dagh (stain),

Heer and Ranjha (the protagonists) and kuriyae (girl) connect

the reader with mundane as well as spiritual experience, i.e

they are metaphorical and intended to convey double

meanings.

Bulleh Shah was preceded by prominent poets such as

Baba Ghulam Farid 12-13th century A.D, Guru Nanak 15th -

16th century, Sultan Bahoo 16th century, and Shah Inayat 16th

-17th centuries A.D. under the guidance of his mentor and

teacher Shah Inayat Hussein, Bulleh Shah produced sufi

narratives to connect people to divinity. The narratives of

Bulleh Shah address all people irrespective of their religious

affiliations, racial or ethnic backgrounds. His narratives when

read or sung not only envelope their readers in ecstasy but

also give directions to the righteous path on which lie their

worldly and spiritual success.

Purpose of the Study

The purpose of this study is to discover the extent to which

Michael Alexander Kirkwood Halliday’s (1985) meta-


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functions can be used to analyse linguistic elements i.e.

(nominal and verbal groups) present in Bulleh Shah’s kaafi,

Ranjha Ranjha. This article also includes Dennis Teadlock’s

(1983) account on the authenticity of oral literature from his

book The Spoken Word and the work of interpretation. Dennis

Teadlock talks about oral literature as a repository of forms

and images. The researchers in this context aim to link for

example, sufi narratives and in the present context it is the

genre of kaafi which may be seen as a complex ceremony

from the oral to written medium. The kaafi may be seen as a

miniature form of the entire sufi experience. According to

Dennis Teadlock the narrators or poets in a poetic

experience can either be poets or they may sometimes

behave as narrators to punctuate their visible texts according

to the rise ,falls and contours of their oratical texts.

Oral delivery and syntax move together in a synchronic

manner, while the audible texts will be studied in a correct

manner to carry out this particular metafunctional analysis of

the kaafi. A kaafi is that form of oral literature which

according to Teadlock means a hypothetical reconstruction

of delivery regarding a dedicated sufi text. Major shifts the

wording of syntax can contribute to the metafunctional

structure while dealing with a genre like a kaafi.

According to Halliday, the role of a practical poet is to

extend his very own poetics into the reigons of linguistics

and to experiment effectively with tools like the meta-

functions. In the realm of kaafi chosen as a poetic genre the

present researcher is able to understand and integrate a

term“ A performable text” used quite essentially coined by

Teadlock (1983) . The secondary function of such linguistic

analyses would meant represent new dimensions and subtel

effects created by the language metafunctions. In addition


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the researcher has used ideas presented by ,Dennis Tedlock

who has demonstrated some basic methods for transcribing,

translating, and interpreting oral performances or similar

such techniques which carry a wide range of implications for

areas in speech acts. How ever this present research does not

involve transcribing and translating but at present the

researcher will use and consider the interpretative techniques

by Teadlock. Teadlock as he, himself mentions in his oral

interpretations has at his best been able to reveal the

categories and concepts of poetic and hermeneutic

interpretations used for some Western literary traditions. He

narrates that these techniques cannot exactly be carried out

in its entirety for the sake of interpretive art of oral narratives

of other languages however they may be applied after

extensive re-evaluation.

The researcher through this research article aims to

investigate both the nominal and verbal groups in the kaafi.

Throughthe metafunctions of persons and their

modifications for the nominal group, the naming elements

are used however the verbal group will include tense and

modality explained through the textual functions which are

immanent in this kaafi Ranjha Ranjha Kardi... By

understanding the nominal and verbal groups meta-

functionally, the researchers are able to discover underlying

themes that create an essence for the kaafi, for example, the

poetic voice and the reader’s voice. This research article is

going to unfold the duality of clauses through meta-

functional meanings and this article will also reveal ways to

investigate ideational, textual and interpersonal functions

which will be used as a linguistic tool box to break down the

complex structures present in this chosen kaafi into simpler

forms. One of the differences in Halliday’s and Dennis’s way


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of dealing with meta-functions is that in the present context

of the research, Teadlock (2013) uses the word

mythographer who breaks down meanings through

metafunctions and Halliday uses the term narrator who deals

with matafunctions without the distinction between mystic or

other types of analyses. The challenge for the present

researcher is to mould this analysis in the context of

interpreting sufi narrative i.e the genre of kaafi.

Significance of the Study

This study aims to contribute towards revealing the meta-

functions of the kaafi under discussion. Previously, meta-

functional analyses have been carried out on different poetic

narratives and literary texts written in the English language. This

study is first of its kind to deal with clausal analyses in the

domain of Punjabi language via meta-functional exegesis of

sufi poetry in Punjabi. This study will help the readers to

understand how well the earthly and unassuming vocabulary of

this chosen kaafi distinguishes between godly and earthly love.

Duality of clauses, examined by Teadlock (1983) means

the presence of two opposing ideas in the same clause. For

this purpose, Teadlock gives examples like the conflict

between the benevolent(kind) and the malevolent(hostile).

As Teadlock implies the benevolent and malevolent

antonymy, it simply means the co-existence of two moral

opposites at work. The moral opposites might, for example,

exist in a “worldview” which has one God, or perhaps more

than one gods, or none. Teadlock also relates to the fusions

of centers or the fusions of intimacies during which one act

or phenomena meets or fuses with another similar or

opposite act or phenomena. The same phenomena of duality


111

is expressed by Halliday by the name of ideational function.

In the context of Bulleh Shah’s kaafis the moral and dualistic

philosophies of Bulleh Shah can be compared with

Teadlock’s interpretations about oral literature. However

holistically, Halliday’s metafunctions will be used as an

analytical tool. In the present kaafi the use of

common/words like loi (cape), chaddar (sheet), dagh (stain),

and participants like Heer, Ranjha, kuriyae (girl) and unho

(them) etc. eventually relates meanings with spiritual and

earthly love.

Research Questions

1. What are the linguistic elements in the selected kaafi

which represents the meta-functions?

2. To what extent can meta-functions break down the

structures of the kaafi into simpler forms?

3. How does the present meta-functional analysis of the

kaafi reveal multiple layers of meanings?

Methods and Materials

The sample for this research has been chosen from among

one of the famous kaafis which Bulleh Shah wrote in 1710.

The method currently used for this research is firstly the

thematic analysis followed by a detailed metafunctional

analysis of the given text. The data comprising clauses of the

kaafi are analyzed by the aforementioned method for

metafunctions. Thematic analysis, according to Braun and

Clarke(2006),is widely used as a qualitative research technique

in which excerpts of texts from poetry or novel are coded or

broken down into further manageable categories at different


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levels: sentence, phrase, word, theme and so on. Similarly an

initial thematic analysis is done in this article, under the

broader parameters of qualitative research methods which

aim to indicate epistemological themes and pattern.

Theoretical Frameworks

Halliday’s meta-functional theory has been used as a

theoretical framework for this research. Webster (1999),

Benson (1985), Johnathan and James (1968),have applied

meta-functional methods for interpreting literary texts

including mystic ideas in order to convey systemic

functional grammar rules.

According to Webster (2012), the first meta-function .i.e.

Ideational construes experiences and meanings about the

outer and inner worlds, it is also known as the field. The

second meta-function is labeled as the interpersonal

function or tenor which involves social relations, i.e.

meanings concerned with communal relations, while the

third meta-function called textual or mode weaves together

the first two meta-functions in order to shape up an

accumulative text.

The above mentioned mechanism, has been used

originally by Matthiessesn and Bateman(1991) which is

mapped out onto the structure of the clause for the chosen

kaafi. Each meta-function will be discussed in detail with

examples from the kaafi to explicate a multi layered clausal

analysis.

Secondly this research revolves around the methodology

of Dennis Teadlock which considers the thought processes

and violations regarding integrity of the written and spoken


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codes. Since kaafi is widely used in the oral form Teadlock

(1993)’s variation has been applied.

Ideational Function or Field

The ideational functionalists language users make meaning

out of reality. Halliday (1925) further divides the ideational

function into logical and experiential parts. The experiential

part according to Halliday (1925), is represented by the

presence of an actor, who in the given context of the kaafi is

represented by the protagonist named Ranjha. In this

research article a link has been created between the chosen

kaafi and the ideational meta function in such a way that the

grammatical resources at the initial clausal level interpret the

inner and outer experiences of the poet expressed through

“words” as domains of functions and meanings of our worlds

through the systems of transitivity.

According to Sinclair (1985), “logical part of the ideational

function refers to the grammatical resources present in the

fabric of language for building grammatical units into

complex structures”. For instance, in the present context of

this kaafi, by combining two or more clauses in a clause

complex sadhu main udheedo ranjha, sadhoo, i.e. sadhu

meaning “call” sets predication at the initial level. Here the

researcher links the grammatical aspect of ideational

function within the framework of the given kaafi. In this way

the logical part of the ideational function also looks after the

process of creating meanings between clause and clause

complexes. In the given kaafi the ideational function of

language through the “process” part of meaning making

process means as Hamzic (2012) puts it, a unique semantic

verb, i.e. a verb which is related to doing, happening, feeling,

sensing, behaving and existinge.g in the kaafi these are :

sadhoo (bring), diljoi (empathy), wassey (exists), pehan (wear).


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According to Halliday (1976), “The semantic verb may

express an event, i.e. relational, physical, mental or emotional

states when sorted into the semantic system of the clause.”

This idea is quite similar to the context of oral literature of

Zuni language , a little different yet thematically similar idea

presented by Teadlock (1983) i.e the occurrence of stress

and pitch patterns to control the pace and quality of

narratives in the Zuni language.

The experiential section in the ideational meta-function

organizes the language user’s or reader’s experiences and

understandings about the world and it also deals with the

concept of transitivity as in the verb kardi (‘she does’) used in

the kaafi. Halliday (1991), explains the experiential meta-

function as a transitivity function developed via the concept

of transitive and intransitive verbs, i.e. whether a verb takes

an object or not. In Halladian meta-function, transitivity is a

major component of experiential part in a clause which deals

with the transmission of ideas representing experiences.

According to Fowler (1986),transitivity depends upon

participants. Meta-functionally speaking the participants in

subject or object positions of a clause represent different

labels such as actors, sensors, processors and carriers. The

experiential meta-function includes sub-functions like

manner and circumstance which includes cause and location,

while the presence of locative case indicates location, e.g.

prepositions including in, on, upon.

The Interpersonal Function or Tenor

The second meta-function is labelled as the interpersonal

function and it is also known as tenor. “The interpersonal

function is the participatory function for language”. (Halliday

2007). Halliday further explains meanings in language from

the point of view of social interaction. This meta-function


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allows the expressions of interpersonal setups between text

producers, i.e. writers and text consumers or readers. In this

article the interpersonal meta-function is revealed step wise

by breaking down the given kaafi into clause levels. The

clauses are analyzed from the perspectives of two elements,

i.e. mood and residue. The mood aspect throughout this

kaafi is predominantly interpersonal and conversational as

Baba Bulleh Shah expresses love towards his mentor Shah

Inayat Hussein using the persona of Ranjha and reveals this

emotion of love to the reader through this kaafi who acts as

an observer. The element of mood is further categorized into

subject and finite verb, while the remaining part of that

sentence is called the residue. The sentence pattern followed

for expressing declarative sentences through interpersonal

meta-functions is subject + finite verb word order. Those

sentences of the kaafi in which structures, for example, finite

verb + subject word order are present, the interrogative

mood prevails.

While dealing with finite verbs ,subjects or tense choices,

the interpersonal meta-function of language helps to express

speech functions such as persuading, demanding,

recommending, confirming, persisting, and denying. These

verbal functions of mood and clause are expressed through

the words like hoi (to become), naakho (do not say), karay &

kar (to do), wasey (to reside), lagaya (to bond). According to

Teadlock (1983) different texts serve to be evident of

contemporary performances to elucidate patterns exhibited

by different texts. Teadlock (1983) says that old texts can be

written recently in order to advance the analysis of oral

narratives.

The interpersonal function on the whole indicates the

presence of a vocative case. According to Holton (1997), the


116

vocative case means inclusion of a noun that identifies a

person or an object being addressed. The verbs present in

this kaafi support the nouns of the kaaf ii.e these verbs

reflect the vocative case. Bulleh Shah has addressed the

reader by using a plural pronoun aakho and later towards

the end he uses the vocative case for himself, i.e. “le chal

Bulleya” (‘take me to my own being’). A vocative expression

according to David (1997) is an expression of direct address

where the identity of the party spoken to is set forth

expressively within a sentence.

The Textual Function or Mode

The third meta-function of language is textual or mode.

Exploring thematic structures through the textual functions

involve clausal analyses. The textual function has two sub-

parts called theme and rheme.The theme part sets up a local

context for each clause and the rheme, initiates when the

subject has been set up by the theme. In kaafi: Ranjha

Ranjha the primary theme is the poetic voice and the rest is

called rheme also known as residue in Hallidian terms. From

the very first line the theme is related to the given

information about the poet where he has portrayed himself

as a feminine pronoun in order to establish his subjugation

through his poetic persona. Rheme or residue is related to

new information present in a clause which, in this context, is

as important as theme. Martin (1992), elaborates that

“Theme is equated with what the speaker or author is all

about while rheme is that structure which is either listener-

or reader-oriented.”

The textual meta-function helps the reader to understand

how ideology can be embedded in a text, sometimes below

the level of conscious notice. For example, in the chosen


117

kaafi ideology pertains to creation of an analogy made

between Shah Inayat Hussein and Ranjha who is Baba Bulleh

Shah’s mentor. This textual meta-function is used for the

purpose of persuasion. The textual meta-function is further

used in texts for negotiations of conflicts and disagreements.

The textual function, of this kaafi, has the following

properties:

It creates a discourse and dialogue among different

participants, e.g. lover (Heer),beloved (Ranjha),

mentor(God), and disciple (Bulleya).

Textually, the clause functions as a message. For example,

“Chitti chaddar laasutt kuriyaey pehan faqir di loi. Chitti

chaddar dagh lage siloidaghna koi. (The white sheets will

show the stains but the red cape will hide your sins and

stains.). There are vivid messages through simple

vocabulary about the reality of virtue and sin presented

within the structure of the kaafi.

The textual functions serve as linguistic expressions for

ideational and interpersonal functions.

Each of the above mentioned meta-functions have

principal systems or functions in the network of clauses.

These principal systems or meta-functional layering is shown

by a model developed by Matthiessen and Bateman (1991).

This model (already shown in the research methodology) has

been applied to this research article directly for the clausal

analysis of the chosen kaafi.

Rationale for Choosing the Text

Ranjha Ranjha Kardi hun mei apey Ranjha hoi is a famous kaafi

of Baba Bulleh Shah written during the year 1710. The first line

of this famous kaafi has become a proverbial in Punjabi


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language with the variation between hun mein (‘now’ and ‘I’)

and way mein (hey! It’s I ).Punjabi speakers in general are able

to relate to this kaafi because of its popularity. As an example

this kaafi provides a broad spectrum of deep and surface

meanings within each clause. Choosing this kaafi for meta-

functional analysis can be justified on the grounds which

provides a blue print for the application of the three meta-

functions of language. This kaafi reflects the personal

experiences of the poet as the poet Baba Bulleh Shah wishes to

be personified as his mentor or beloved referred to as Ranjha.

The interpersonal function is not only reflected through the

communication between the protagonists (Ranjha and

Heer),but also through the metaphoric presence of a dialogue

between God and his disciple or Mentor and his disciple.

Ranjha and Heer, who are popular characters originally created

by Warris Shah,( a predecessor of Baba Bulleh Shah). These two

characters are popular metaphors of love in Punjabi folk poetry

just like Romeo and Juliet by Shakespear. In the context of this

poem the characters are referred to as the mentor (Ranjha) and

as the disciple (Heer), respectively.

The poet Baba Bulleh Shah, uses female pronouns and

implores the company of his mentor. He wishes to surrender

himself in the hands of divine authority i.e God. While making

choices the poet derives information about the participants of

a speech utterance which are units of speech and are

bounded by silence, which are supporting the speech act with

a set of personal and other pronouns: mai, mainu, sadey,

unho, etc.(‘me’, ‘mine’, ‘ours’, ‘theirs’). It may be noted that a

personal pronoun is the one which refers to a particular

person, group, or thing. Like all other pronouns, personal

pronouns can take the place of nouns and noun phrases.

There are six verses or lines used in this kaafi for which

personal pronouns have been used in order to signify

meanings. The presence of these personal pronouns help to


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develop an overall impact of this poem on the readers. Six

different references of the pronoun I and mine (mai and

mera) and its variant forms has created the inner voice in the

kaafi subsequent to the poet discovering his identity in the

middle of the poem. The poet also involves some other

participants in the poem, i.e. the people around him. He says

Heer na aakho koi, i.e. “O people! Do not call me Heer”. The

distribution of personal and other pronouns in the kaafi

maintain the interpersonal tone of the poem.

Another major participant in the poem is kuriyae, (girl) a

common noun used for a maiden. Here kuriyae is a maiden

who is in love, either in the ishq-e majazi (infatuation/human

love) or in ishq-e haqiqi (real/or divine love). Bulleh Shah

himself provides his readers with interpersonal experiences

offering the best interpretations to understand the gravity of

this love. Kuriyae acts as a passive recipient, which means

that passive subjects are indirectly affected by the action of

the main verb. Moreover, clothing items such as chaddar

followed by a verb desindi (shows) represents the

relationship of passive recipient and its main verb. mun-i.e

(heart) has been mentioned and is used as a personification

of a place to reside (Ranjha resides in my heart).Nouns like

kuriyae, etc. are used to express the voice of the poet Bulleh

Shah. The above mentioned examples infused with symbolic

imagery call for a special thematic analysis of the kaafi

through meta-functional linguistic tools.

Commonly Emerging Patterns and Themes in the Text

The original Punjabi version of the kaafi will be analyzed

meta-functionalyin order to identify some consistently

emerging themes. All the verses of the kaafi are placed in

chronological order and all three meta-functions are

discovered in each clause. Each clause will be re-written in


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Roman script for clear understanding. It may be noted that

the three meta-functions are used as tools to justify

commonly emerging themes, e.g. poetic voice, reader’s seat,

displacement and unity, etc.

Poetic Voice

رانجھا رانجھا کردی ھن میں آپے رانجھا ھوئی

Ranjha Ranjha kardi hun mein apey Ranjha hoi

In the love of Ranjha I myself have become Ranjha.

This textual analysis will commence by using a-meta

functional model originally created by Halliday and later

adapted by Matthiessesn and Bateman (1991). It may be

noted that the same analysis will be applied at the end of the

kaafi where the same line has been used as a refrain.

Ranjha Ranjha Kardi hunmein Apey Ranjha Hoi Clause

Theme Rheme Textual

Vocative Mood

(finite)

Subject

(vocative)

Finite

(verb)

Interperso

nal

Process (transi

tivity)

Manner +Actor

(participant)

Process

(transitivity)

Ideational

Table.1: Poetic Persona in the kaafi

The above tables starts with the ideational function. This

model starts from below and follows a bottoms up approach.

The reason for this inverse approach is that the ideational

function lies at the core of the clause and develops upwards

to unfold interpersonal and textual metafunctions. Within the

interpretation of the kaafi there searchers discover that the


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ideational function as per Matthiessesn and Bateman model

is like a tree trunk from which the branches of interpersonal

and textual metafunctions grow. The Ideational meta

functional analysis, of the above clause shows the presence

of an actor as a participant. The process part of this clause

starts with an utterance Ranjha Ranjha and the verb such as

kardi (doing) is associated with the actor or subject mein, i.e.

“I” there is an additional adverb of manner hun (now)

attached to it whereas, Mein + Apey is the subject. Over here

there are two participants one is an actor mein (me) and the

second is a processer the word Ranjha (proper noun).

According to Halliday it is the logical part of the ideational

function which expresses Ranjha as a protagonist through

the available linguistic resources.

On the other hand, the experiential part organizes our

experiences about the presence of Bulleh Shah’s inner voice.

As a unique technique the poet uses a feminine voice which

reveals the presence of an experiential metafunction. The

personal experience involves a dialogue between Bulleh

Shah and his mentor (the Supreme Being or God) to the

extent which satisfies him to maintain a subordinate feminine

pronoun. On the whole the experiential function explained

earlier of this clause expresses the process of uttering the

word Ranjha Ranjha.

The interpersonal meta function exists in the subject

(Ranjha) + finite verb (kardi) order hence reflecting a

declarative tone. The vocative noun is also presented in the

word Ranjha. Here the poet declares his love for Ranjha.


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The analysis of textual function begins with the theme

part. As mentioned in the section on theoretical

underpinning the theme expresses ideology behind

meanings and above the conscious level. The clause begins

with the protagonist of the poem Ranjha which is used as a

noun for God or Godly love. The rheme part of this verse

deals with the spiritual development of which the poet talks

about. It is that process through which (in the love of Ranjha)

the poet says that he, himself becomes Ranjha. Ranjha is the

theme or the given information in textual analyses and the

rest, i.e rheme consists of some new information present

after the theme.

According to Sheikh(2009),the theme part in Punjabi

poetry and Punjabi language is not subject oriented but

process oriented, i.e it presents a set of axiomated ideas to

deal with resolution. This means that in Punjabi language

process leads to thematic content of the kaafi not only for

the purpose of meta functions but otherwise as well.

According to Halliday 1994,The theme in the textual function

is followed by a participle in an utterance form. Participle is a

word created from a verb. This is similar to the structure

found in the above mentioned clausal analysis under the

theme of poetic persona. For example hoi ( to become)is a

past participle which has been followed by kardi ( to utter/to

do) which is a simple present tense.

The textual meta functional analysis of the above line has

emerged as an overlap between interpersonal and ideational

meta functions. The textual function is split into theme and

rheme. It also determines the mode or style of the message


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which is conveyed through the kaafi. At the beginning of the

verse the declarative tone or part Ranjha Ranjha + kardi

establishes an action. The kardi part represents an action

verb and the presence of the poet’s voice exhibits textual

function of language. Teadlock has also just like the

Halladian metafunctions proposed a scheme for transcription

and interpretation of narratives and he shows these by

exhibiting some dramatic features. There have been other

folk narratives like Afro and Anglo American oral narratives

which are part of Teadlok’s interpretative methods.

Reader’s Voice

ھیر نہ آکھو کوئ "ڈھیڈو رانجھا"سدھو مینوں

Sadho mainu dheedo ranjha heer na aakho koi.

Call me “dheedoRanjha” and Do not call me heer.

Sadho mainu Dheedo Ranjha Heer na aakho koi Clause

Theme Rheme heme Rheme Textual

Vocative

(case)

Mood

(imperative)

residue

Interpersonal

finite subject

Transitive Actor Process

(Material)

manner Ideational

Table. 2: Use of Pronoun and Antecedent to Reflect the

Reader’s Voice

The above example shows an ideational transitivity. The Process type function(within ideational function)of this clause is verbal as well as relational. This means that the author is asking the readers who are refered as pronoun koi


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(someone).The process type is also relational in nature since there is a synchrony among the nouns dheedo, Ranjha, mainu, Heer and koi. Interpersonally, the mood type is imperative as the author’s voice uses naakho (don’t call).Also the clause begins with a verb followed by a subject (as per sentence conventions of Punjabi language) therefore this verb and subject combination results in an imperative case. In terms of textual function the theme provides some new information within the marked theme part and the remaining information is called rheme. “Dheedo Ranjha” here means the reflection or manifestation of Ranjha. At this point in the kaafi the requirements of meta functions being above, below and around the text are fulfilled and the meaning making process is enhanced. There are two clauses in the verse/ line under consideration and both contain nouns (nominal groups) in combination with a verb, i.e. finite +subject in the first clause, and subject + finite combination in the second clause. Therefore both the clauses in binary forms show imperative functions. As mentioned earlier the subject is also known as an agent or the doer of the action in metafunctional terms. It means that the agent here is the carrier of interpersonal information, i.e what the author expects from the readers. The author says, “O people call me Ranjha”, where the word “people” stays as a hidden subject. The presence of pronouns reveals the reader’s voice. The interpersonal metafunction of language in the above clause is evident with the presence of grammatical categories like subject and verb.

Spiritual Oneness

رانجھا من وچ من رانجھے وچ غیر خیال نہ کوئی

Ranjha mun wich mun ranjhey wich ghair khiyal na koi

Ranjha resides in my heart and my heart resides in Ranjha.


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Table.3: Use of Rheme and Theme to Mirror Spiritual Oneness.

The above combination for the clause according to

Manzar 2017, is not found very often in other Punjabi

narratives. A specific pattern is created by using Ranjha +

mun which and mun + Ranjhay which (i.e. Ranjha resides in

my heart versus my heart resides in Ranjha). This is called

juxt a positioning of the object and subject. According to the

Oxford Dictionary there is presence of the logical meta

functions in the structure of the clause. (a sub part of

ideational function) as clauses are combined to form clause

complexes. Experiential metafunction (within ideational

function) helps to express transitivity as this clause deals with

the transmission of ideas through the author’s voice.

The Experience of residing in Ranjha’s heart coincides

with the ideational function in a locative sense, i.e., due to

the presence of preposition “in”. Actor over here is mun or

heart which functions as a carrier of Ranjha. At the

interpersonal level since the mood is declarative, a pattern

develops i.e subject +the finite verb form.

Ranjhamun which Mun Ranjhay which Ghair khiyal

na koi

Clause

Theme Rheme Textual

Declarative

(Subject + object

+ preposition)

Mood Interpersonal

Declarative

(Subject+ object

+ preposition)

Declarative

(Subject +

finite )

Subject+ locative Actor +object process Ideational


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Self Reliance

ویے دلجمیں نہیں او آ پے اپنی آپ کر

Mai naahi oh apey apani aap kare diljoi.

Not I but He consoles himself.

Mai nahi o apeyapaniaapkareydiljoi clause

Theme Rheme

textual

Subject Vocative

(finite)

Mood(declarative) interpersonal

Subject+finite

Subject actor process Manner ideational

Table.4: Self Reflective stance to reveal faith

There is a triple usage of a personal pronoun structure in

this single clausal analysis.(o apey apni aapi.eapey, apni ,ap)

which is quite typical of Punjabi poetry. Ideationally the

negation marker like naahi (not) is also present in this clause;

here the speaker or interpreter of this single thought

process/utterance is the author himself. The presence of

auxiliaries(helping verbs and the main verbs) constitutes the

predicative part of the clause. According to Murray (2009),

Finite verbal agreement is with the nominative subject, except

in the transitive perfective, where it can be with the direct

object and with the subject taking the interrogative

construction.

Interpersonally, the participatory function of language is

observed through the indicative, and declarative mood. The

inherent theme of self reliance can be observed with words

like “oh apey apni aap”, i.e. he, himself. Textually, the phrase


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mainahi o aapey off sets the clause and maintains a point of

reference for the single clause.

Universality

جو کج ساڈے اندر وسے ذات اساں دی سوءے

Jo kuj saadey andar wasey zaat asan di soyi

Whatever exists in me goes un-realized

Jo kujh saadey

andar wasey

Zaatasandisoyi clause

Theme Rheme textual

Mood

declarative

Mood

(indicative/declarative)

interpersonal

Subject finite

locative Actor Manner ideational

Table.5: Use of Declarative Mood to Express Universality

This clause combination shows two distinguished types of

pronouns. One pronoun is saaddey, (ours)and the other is

assandi, (ours).The two combinations here exist inadiglossic

manner. Diglossia is a linguistic state which occurs when two

varieties of the same language are used under different

conditions or circumstances, i.e. formally or informally within

a community often by the speakers of the same language.

This term usually applies to languages with a distinct ‘high’

and ‘low’ (colloquial) varieties of Punjabi. According to

Bhattia (1999), Majhiis Punjabi's prestige dialect or high

variety because it is standard of written Punjabi and Doabi is

the low or colloquial variety. The ideational meta function

exists within the fabric of the text indicating transitivity.

Existence of a phenomenon within the self is part of


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ideational function and its also represents the theme of

universality, i.e. we as humans do not materialize our creative

genius. The possessive function is obvious through a

pronoun assan (ours).This interpersonal function is

indicative/declarative type as it indicates a pragmatic

declaration of this clause. Ideational function is evident since

there is presence of a locative word andar (inside).

Godly Love v.s Earthly Love

جس دےنال مین نیو لگایا اوھیو جیسی ہوی

Jis dey naal main neonlagaya ohio jaisi hoi

When I laid my eyes on the beloved, I myself became like him.

Jisdeynaalmai Niyolagaya Ohio jaisi hoi clause

Theme Rheme textual

Vocative Residue Mood interpersonal

Subject + finite

(declarative)

Process type: relational ideational

Table 6: Harmonising Godly & Spiritual love

In the above lines the experiential function seems quite

obvious since the author talks about his past experiences i.e.

how he came to terms with himself as abeing. The poet talks

about a term “niyo”, i.e the eye as his outer and inner eye.The

word niyo represents Godly connection.

The inner eye of the poet justifies the presence of an

ideational function which in turn reflects a relational process.

By using the word niyo,i.e., the inner eye the poet justifies

the reason for his existence in this world. This also shows his

allegiance towards his mentor.


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Interpersonally speaking the pronoun “Jis” (with whom)

reflects the vocative function of the pronoun and in the

second half we see a subject and finite relation expressing a

declarative mode. Arelational process states the things which

exist in relation to other worldly things. Here, the pronoun

“Jis” (whom) and “Oho” (that) creates a bond within the

structure of the clause. The earthly love is depicted with the

phrase ohio jaise hoi, i.e. the poet finds his own reflection in

the beloved, i.e. God or Godly love.

This clausal analysis shows the presence of an

independent clause with a relative clause. Both the clauses

show a clear grammatical inclination. As with other

dimensions of the metafunctional theory, Halliday (1996),

describes the relation of grammar with lexis(for example in

the above clause most of the agents are connected to a verb,

e.g. Mai (I), jaisi (like me) and hoi(to be). Halliday describes

these semantic verbs as one of a cline and therefore one of

delicacy. In 1961, he wrote that, “The grammarian’s dream

is...to turn the whole of linguistic form into grammar, hoping

to show that lexis can be defined as most delicate grammar”

which according to Willcock, (2001) is analysed into process

and participant already discussed in section 1.6.1. Similar

pattering technique is evident in the analysis of the above

mentioned line, i.e., niyolagaya, “laid my eyes”.

Transformation

چٹی چدر ال سٹ کڑئیے پہن فقیردی لوئ

Chitti chaddar La sut kuriya Pehan faqeer di loi

Take off the white sheet o girl and wear the saint’s cape.


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Chittichaddar La sutkuriya Pehan faqeer

di loi

Clause

Theme +Rheme Theme+ Rheme Textual

Object Mood type

(imperative)

Mood type

(imperative)

Interpersonal

Finite+subject(subject

is vocative )

Finite+subject

Actor Process+

Manner

Ideational

Table 7: Vocative Function to Reflect Transformation

The combined effect of this clause is imperative. Chitti

chaddar, (white sheet)an inanimate object is used textually to

accord an entirely new information along the clause called

the theme. According to Ralph Waldo Emerson Baba Bulleh

Shah uses colourimagery, symbols and signs to represent

divine concepts. These images and colours through an actor

or agent kuriyae demonstrates an obvious speech function

something like persuasion for the reader who is acting as a

text consumer. The presence of colours and images

explicates the experiential functions (which is part of the

ideational function of this text and expresses the author’s

feelings about the persona of kuriyae (girl). According to

Fowler (1996) transitivity is investigated from above and

below. This particular clausal analysis represents the way an

ideational function is indicated through colors, images and

different metaphors of daily objects. Interpersonally

speaking, both the independent clauses show a declarative

mood. The vocative(addressing or invoking) noun is “Kuriya”

as she is being asked(imperative) to take off the “Chaddar”.

Ideationally there is presence of experiential function shown

by the actor kuriyae, who is going through a

transformational experience and the reader views how the


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climax of the poem is achieved. Textually there are only two

themes and rhemes as two independent clauses are present.

Sin Vs Virtue

داغ لگیسی لوئی داغ نہ کوئی ررچٹی چ

Chitti chaddar dagh lagesi loi dagh na koi

The white sheet will show stains while the red cape will hide

your stains.

Chitti Chaddar dagh

lagesi

Loyi Daghna koi clause

theme rheme Theme rehme textual

Mood Mood interpersonal

Subject finite Subject finite

Actor+processor Actor + processor ideational

Table 8: Representation of Sin and Virtue Through Inanimate

Objects

The metafunctional analysis of the above line is carried out in a dual manner as both the clauses are independent. At an ideational level the actor part in both the clauses is played by two very common inanimate actors or objects e.g. chaddar (sheet) and loi (cape). Ideationally this refers to the poet’s experiential account(experiences) about the connotations of the white sheet and red cape respectively. This experiential function orients the readers to create their own analogies of the text. The “going ons” about the functions of the word (as discussed in the theoretical framework) is obvious at clause level for both of the above independent clauses of this verse. Interpersonally the mood is declarative and vocative case is not quite evident. Textually both the clauses send a very strong message by balancing


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out the rheme and theme in a way that in each clause the subject part establishes the textual theme.

Displacement

کوئرہ لے چل بلھیا سالین ملے نہ تخت ھزا

Takht Hazara Le chal bulleya Salein miley na koi

Take me to takht hazara I haven’t been there since long.

Takht Hazara Lechal bulleya Salein miley na koi Clause

Mood(imperative) Mood (declarative) Interpersonal

Ideational

Object+Finite+ subject Object +finite+

subject

locative Transitivity +

actor

Process (manner)

+ actor

Textual

Table 16: Revisiting the holy places in the context of the

kaafi to show Displacement.

As a final note the above line presents a combination of

two clauses, where the poet goes back in time and engages

himself and the readers in a monologue to visit his beloved

place called, takht hazara. Interpersonally the mood in these

clauses is both imperative and declarative in nature. He uses

the imperative manner to urge his visit to the beloved place,

while in the second half he assumes a declarative tone.

According to the process type at a relational level

(ideationally), he relates his transitivity with a visit to the

place takht hazara. The two functions, i.e. Ideational and

interpersonal intertwine with the concept of displacement to

create a collaborative effect of textually with displacement at


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the heart of clause. These functions blend with displacement

to portray the image of takht hazara as a beloved place.

Discussion and Conclusion:

This study investigates, the unique nuances of language

contributing to the meaning potentials of the kaafi, Ranjha

Ranjha Kardi hun mein apey Ranjha hoi through Systemic

Functional Grammar. This may not be an ultimate framework

used to interpret meanings and take the readers (just like the

shrine attendees) to an exotic trance. The most interesting

aspect of communication in this kaafi is the poet’s vision to

transcend the limitations of ordinary language. Bulleh Shah

makes use of different analogies to analyse the relationship

with his mentor. The three meta functions: Ideational,

interpersonal and textual are present significantly throughout

the kaafi. The poet successfully manages to keep himself in

place and praises the attributes of the mentor in this

connection.

While investigating the interplay of the meta functions in

the kaafi it was found that Bulleh Shah unfolds different

phases of its meaning; with ideational function placed at the

initial position and interpersonal situated at the final level. The

distribution of the processes among the participants or actors

demonstrates that the character of Ranjha, dominates the

scenario of the poem. The poet is addressing in a humble

tone about his feelings towards the mentor which reflects the

experiential function. All the three participants throughout the


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kaafi differ from one another linguistically. Kuriyai, Ranjha,

Heer and Bulleya have different transitive roles.

Interpersonal and textual reference in addition to the

logic in the structure of the kaafi proves how clauses relate

to each other, and add to the semantic understanding of the

poetry. This attempt to carry out a systemic functional

analysis shows that this model can help the researchers

acquire a comprehensive vision of the literary messages

embedded in the narratives of Bulleh Shah. The structural

analysis provides contemplation of linguistic structures on

which the kaafi is developed. This intensifies the overall

understanding of the reader and deeper understanding of

the linguistic dimensions. The translation of each verse in

English provides a broad spectrum of meta functional

versatility and in fact leaves ideas for future researchers in

the area of comparisons, i.e., of original text (Punjabi) and

translated (English) text. The overall targets achieved through

this metafunctional analysis are the reader’s understanding

of textual meta function as a foundation for the

development of interpersonal and ideational functions in the

kaafi. These metafunctions as linguistic tools unfold the

multilayered meanings inherent in the kaafi.


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Appendices: Sample Text رانجھا رانجھا کردی ھن میں آپے رانجھا ھوئی

Ranjha Ranjha kardi hun mai apey ranjha hoi

In the love of Ranjha I myself have become Ranjha

سدھو مینوں ڈھیڈو رانجھا ھیر نہ آکھو کوئی

Saddo mainu dheedo Ranjha heer na akho koi

Call me only Ranjha and do not call me heer

رانجھا من وچ من رانجھے وچ غیر خیال نہ کوئی

Ranjha mun which mun Ranjhay wich ghair khayal na koi.

Ranjha resides in my heart and my heart resides in Ranjha

(no one else can enter the realm of my heart.)

میں نہیں او آپے آپنی آپ کرے دل جوئی

Mai naahi oh apey apani aap kare diljoi

He himself tends to his heart

(me and Ranjha are one and we are in-separable)

جو کج ساڈے اندر وسے ذات اساں دی سوئے

Whatever resides in me is not appreciated

(later on we realize its significance)

Jo kujh saadey andar wasey zaat asan di soyi

جس دے نال میں نیوں لگایا اوھئیو جیسی ہوئی

Jis dey naal main niyo lagaya oho jaisi hoi.

Whomsoever I laid my eyes on

(i.e.Ranjha) I myself became like him

چٹی چادر ال سٹ کڑئیےپہن فقیر دی لوئی

Chitti chaddar la sutt kuriya pehan faqeeran di loyi

Take off the white cape o girl and wear the saint’s dress


136

نہ کوئیچٹی چادر داغ لگیسی لوئی داغ

Chitti chaddar dagh lageysi loyi daag na koi

The white sheet will show stains while the red cape will hide

your stains

تخت ھزارہ لے چل بلھیا سالین ملے نہ کوئی

Takht hazara le chal bulleya sayaalen mile na dhoyi

Take me to my beloved place called Takht Hazara (A sacred

place which otherwise is not in my naseeb (fate)) Takht

Hazara is my beloved place and I will not be able to be there

for long).

رانجھا رانجھاکردی میں ہن آپے رانجھا ہوئی

Ranjha Ranjha kardi main hun Apey Ranjha hoyi


137

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http://en,org/Iryati.lums.edu.pk

Ihtesham Khan*

Adnan Ahmad**

Muhammad Tahir Khan***

Muhammad Ilyas****

The Impact of GDP, Inflation,

Exchange Rate, Unemployment and

Tax Rate on the Non Performing

Loans of Banks: Evidence From

Pakistani Commercial Banks

ABSTRACT

One of the important determinants of the banking sector

performance are the loans advanced for the purpose of profit.

Thus, banks take loans and repayment as a yardstick.

Specifically, banks take a serious note of its repayments and

those loans, which either default or declared as Non-

Performing Loan (NPL). Many factors play an important role in

the repayment of loan advances as well as those that are

declared as NPLs. Such factors include but are not limited to

regulatory and institutional environment, bank-based micro

* PHD Scholar, Institute of Business Studies and Leader, Abdul Wali

Khan University, Mardan ** Assistant Professor, Institute of Business Studies and Leader, Abdul

Wali Khan University, Mardan *** Lecturer, Institute of Business Studies and Leader, Abdul Wali Khan

University, Mardan **** Lecturer, Institute of Business Studies and Leader, Abdul Wali Khan

University, Mardan


142

economic indicators and macroeconomic determinants. Thus,

the main purpose of this paper is to assess the macroeconomic

factors such as GDP growth rate, exchange rate, inflation,

unemployment and tax rate as determinants of NPL.

Secondary data of NPL is taken from the respective banks’

annual reports and the macroeconomic data from the World

Bank for the period 2006-2016. Using a panel data, both Uni-

variate and Bi-Variate analyses are used to investigate the

relationship of NPL with these macroeconomic variables. The

results show that GDP growth rate, exchange rate, tax rate,

inflation, and unemployment effect NPL in a respectively

different manner. The study conclude that macroeconomic

activities of a particular country are important indicators of a

sound financial institutional system.

Keywords: Macroeconomic Factors, Non Performing Loans

(NPL), Fixed Effect and Random Effect Least Square Regression

Analysis Techniques

Introduction

Financial institutions play the role of a back bone in an economy. Every sound economic system posess a strong financial system that has got the ability to absorb the financial crises (Dash & Kobra, 2012). The Central bank or the State bank of each country has the key role to play in this regard to prepare the financial institutions for such financial jolts. The economic sustainability of the economy largely depends upon the sound banking system. In sound economies it is the responsibility of the central banks to develop regulations and policies regarding the operational activities within a country. At the same time it is the responsibility of the banks to follow and implement those regulations and policies in their banks and report to state bank accordingly (Fofack, 2005). All the commercial

Ihtesham Khan, Adnan Ahmad, Muhammad Tahir Khan & Muhammad Ilyas

143

banks mostly adopt the basic rules by receiving money from the customers in shape of deposit and then disburse it to the customers in shape of advances, credit or loans. At the same time the banks give a certain percentage on the deposit to the depositors while receive profit on the advances disbursed to the creditors. Earning spread is a term that is being used as the difference between the borrower’s rate and depositor’s rate. The earning spread is the actual earnings of the banks. At times creditor fail to repay the advances along with its credit rate. This failure is being reported in the annual reports as Non Performing Loan (NPL). The higher the level of NPL rises the weaker will the banks’ ability to maintain a balance between the deposit and

advances ratio and it may lead to bankruptcy. Thus it has a strong effect on the financial system of an economy (Saba, Kouser & Azeem, 2012). That’s why NPL should be considered as tool to measure the sustainability of the banking system within an economy (Nkusu, 2011). There is no single way to measure or report the NPL levels in banks annual reports, it varies from region to region. Basel Committee (2001) defines NPL as the advances or loans that are not being paid for ninety days and more. Banks performance can be badly damaged by the increasing level of NPLs (DeYoung & Whalen, 1994). In USA the increasing level of NPLs in banks caused the financial crises (Sinkey & Greewalt, 1991). Fofack (2005) argues that in

African countries the main source of economic crises was the

rising levels of NPL. Both the developing and developed countries

showed that NPLs has an adverse effect on the financial sector of a

country. Dash and Kobra (2012) checks the relationship between macroeconomic variables and NPLs. There results showed that the high risk banks had greater chance towards defaulted loans.

In Pakistan same problem exists, the State bank of

Pakistan (SBP) has been trying hard in terms of keeping NPL

limits within control but for the last 25 years the NPLs figure

has not fallen below double digit (SBP, 2016). If we give a look


144

at the NPL levels in Pakistan the average level is 14.87% from

1995 till 2016. Currently Pakistan has been 24th in terms of

high levels of NPL countries (SBP, 2016).

Keeton and Morris (1987) were the pioneers, who

investigated the relationship between the macro-economic

variables and banks’ loan-quality. Their sample range contained

over 2400 commercial U.S. banks between 1979 and 1985, and

the study had nexuses the bank loan losses with the macro-

economic variables of the respective country. Pesola (2005)

investigating the banking vulnerabilities in Northern-Europe,

validated the connection between the macro level factors and

debt insolvencies. Now the question arises that do macroeconomic

variables have also the same effect on Pakistani banks performance

in shape of NPLs?

Research Question

The impact of macroeconomic factors on NPLs in commercial

banks of Pakistan. Review of Literature

NPL definition varies from country to country. NPLs are the bad loans that are due to be paid for 90 days or more (IMF, 2005). The State bank of Pakistan (2010) has also classified loans that are overdue for a specific period into different categories. The basic categories are three, i.e Substandard, doubtful and loss. If the loan installment is due by ninety days or more and is not being repaid will be termed as substandard loan. 25% provisioning will be done on the outstanding loan and will be termed as NPL. If the installment is overdue by 180 days or more will be termed as doubtful. 50% provision will be done on the outstanding loans. If the installment is overdue by one year or more their it will be


145

termed as loss and 100% provisioning will be done to the outstanding loan (SBP, 2016). Keeton and Morris (1987) are being considered as the pioneer in terms of establishment of relationship between the NPLs and macroeconomic factors of the country. They also concluded that one main reason behind high NPL levels are the bad position of the macroeconomic condition of the country. It was also being observed and analyzed that NPLs are not the direct contributor to the economy but it has an indirect effect of the whole economy (Drees & Pazrbasioglu, 1998). Now if remedial and timely measures are not being taken it may lead to financial crises in the economy. Adebola, Wan Yousaff and Dahalan (2011) are of the view

that a country owning macroeconomic factors has an impact on the financial performance of the banking sector. Initially the macro-economic variables will be elucidated, that might have an influence on the Non-Performing-loans and the macro-economic variables tend to yearly change in GDP, unemployment rate, Real exchange rate, Tax rate and Inflation rate. Although, the extant of Literature that had investigated the relationship between macroeconomic variables and NPL, and the findings had established only theoretical models rather than giving an empirical evidence. A negative relation exists between NPL and growth in GDP (Jimenez and Saurina, 2009). It is obvious that the growth in the income level of the people within an economy increases loan repayment capacity of the borrower. That at the end reduces the level of NPL in the banking sector of that economy (Khemraj and Pasha, 2009). Khemraj and Pasha (2009) had analyzed the relationship between the inflation rate and the NPL’s strength, they founded that a direct relationship exists between them. Although, on the contrary, Nkusu (2011) carried out a study and founded that the natural connection between non-performing loan and inflation rate can either be direct or inverse. Rationally, the increasing inflation rate will cause increase in the borrowers’ incomes while the physical value


146

of the credit will mitigate, thus the raising inflation rate will enhance the borrowers credit paying ability. Jimenez and Saurina (2005) had investigated the Spanish banking area and the data range was from 1984 to 2003, and they founded that a surge in NPLs is caused by the slow GDP growth, immense real interest charges and the expanded credit environment due to the easy credit conditions. Nkusu (2011) carried out a study and founded that the natural connection between non-performing loan and inflation rate can either be direct or inverse. A positive relationship exist between NPL and unemployment in an economy of the country (Gambera, 2000). But on the other hand theoretical back ground of this relationship shows that a negative

relationship exists between NPL and unemployment. If a person has availed loan from a bank and that person is an employed person. Suddenly he/she losses his/her job then how he/she will repay that loan so in that case NPL increases. In the same way if a business unit has availed loan facility from a bank and suddenly unemployment has hit the economy of the country this may reduce the demand level in that country because of the low purchasing power of the people then the repayment capacity of the borrower will be reduced. That at the end induces increase in the level of NPL in the country ( Louzis, Vouldis and Metaxas, 2012). Different researchers are of different views about the relation of exchange rate with NPL. Khemraj and Pasha (2009) are of the view that a positive relation exists between NPL and Real effective exchange rate. An increase in the exchange rate may effect the loan payment capacity of the borrower (Fofack, 2005) or on the other hand those borrowers who borrow loan in foreign currency then increase in exchange rate will have a positive relation. Interest is the sole income of banks from which the depositor’s rate, tax and other expenses are paid. Now, the banks strategically shift the tax expenses in their credit portfolios to the corporate sector or cleverly reduces the depositor’s rate (Albertazzi & Gambacorta, 2006). Hence, the


147

banks have the system of shifting the tax expenses to its debtors by increasing loan service charges (Khan et al., 2011). Similarly, the banks with greater liabilities deducting taxes are because of the immense mark-up charges. Specifically, there was no purposeful investigation for establishing the natural connection between the tax rate and NPL’s but logically higher tax rate will increase non-performing loans because the higher tax rate will deprive the borrowers of cash and rationally will affect his loan servicing capability.

Theoretical framework:

Based on the above literature reviews, the following

theoretical framework is developed that shows the

relationship between dependent and independent variables.

Independent variables Dependent Variables

Figure Error! No text of specified style in document..1

In this theoretical framework non performing loan is the

dependent variable while GDP, inflation, Exchange rate,

Unemployment and Tax rate are the independent variables

Unemployment

Tax Rate

Non Performing

loans

GDP

Inflation

Exchange Rate


148

that has an influence on Dependent variable either positive

or negative.

Data and Methodology

Data

The main purpose of this investigation is to get impact of GDP,

inflation, exchange rate, unemployment and tax rate on NPLs.

The selected sample time period is from 2006 to 2016. Total of

20 sample banks were selected based on the criteria their

operation started before 2006 and had not merged till 2016, so

that homogeneity can be created in the data set.

Methodology

Since this investigation was spawned to examine the

association between the non-performing loans and

macroeconomic elements, a rational analysis is carried by

following the deductive approach. A Deductive-analysis

mechanically causes the laws or principles to generalize

specific instance and the underlying study is pure-objective

in nature. Thus, quantitative-study technique is used to

analyze the outcome on the recognized causers of non-

performing loans.

Variables Used

Based on the above discussion the following variables are

being used mentioned in Table 1.


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Table 1. Variables Description Variables Definition Sources

Non Performing

Loan (NPL)

GDP Growth Rate

Inflation Rate

Exchange Rate

Unemployment

Rate

Tax Rate

Non performing loans to total loans

Annual percentage growth rate of GDP at market

prices based on constant local currency.

Inflation as measured by the consumer price

index reflects the annual percentage change in

the cost to the average consumer of acquiring a

basket of goods and services that may be fixed or

changed at specified intervals, such as yearly.

Real effective exchange rate is the nominal

effective exchange rate divided by a price

deflator or index of costs.

Unemployment refers to the share of the labor

force and educated force that is without work but

available for and seeking employment.

Total tax rate measures the amount of taxes and

mandatory contributions payable by business

after accounting for allowable deductions and

exemptions as a share of commercial profits.

Banks Annual Reports

World Bank Database

World Bank Database

World Bank Database

World Bank Database

World Bank Database

Empirical Model

In order to assess the macroeconomic impact on the NPL the

following model is used.

NPLit= α + β1 GDP_GRRATEt + β2 INFLATt + β3 REERt + β4 UNEMPLt

+ + β5TAXRATEt+ it

Where:

NPL=Non Performing Loan

GDP_GRRATE= GDP Growth rate

INFLAT= Inflation Rate

REER=Real Exchange Rate

UNEMPL=Unemployment Rate

TAXRATE= TAX RATE


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Results and Data Analysis

The section 3.3.1 will represent the descriptive statistics,

section 3.3.2 will explain the correlation matrix, while section

3.3.3 will explain the panel least square regression models.

Descriptive Statistics

Table 2. Descriptive Matrix for Banks

Variables Obs Mean Std. Dev. Min Max SKEWNESS KURTOSIS

NPL 220 10.15641 8.487209 0 51.56 1.81 2.78

GDP_GRRATE 220 1.275404 0.4400327 0.4741774 1.82092 -0.667 2.1

INFLATION

RATE 220 10.6516 6.29547 1.810757 20.66652 0.429 1.766

EXCHNAGE

RATE 220 4.645083 0.0823222 4.548642 4.808195 0.869 2.55

TAXRATE 220 3.578871 0.1163566 3.453157 3.781914 0.72 1.949

UNEMPLOYME

NT RATE 220 1.738585 0.0691478 1.60543 1.83098 -0.65 2.28

The table 2. Both dependent and independent variables are

present. A total of 220 observations have been used for both

dependent and independent variables. NPL has the minimum

value of zero while the maximum limit was fifty. The standard

deviation is 8.48. GDP growth rate minimum value is 0.4741

and the highest value is 1.820 while the standard deviation is

0.44 while the mean value is 1.275. Inflation rate lowest figure

is 1.81 while highest is 20.66 and S.D is 6.295 which is a little

high. Exchange rate mean value is 4.645, lower figure is 4.54

while higher figure is 4.808 while S.D is 0.0823 which is very

low while mean value is 4.645. Tax rate lowest figure is 3.45

while higher figure is 3.781, So S.D is lower in value that is

0.11635 and mean value is 3.57. Unemployment rate lowest

figure is 1.605 while highest figure is 1.83 and S.D is very low

that is 0.0691. The mean value of Unemployment is 1.7385.


151

Correlation Matrix

Table 3: Correlation Matrix for Banks

Variables NPL

GDP_

GRRATE INFLAT REER UNEMPL TAXRATE

Non Performing

Loan (NPL) 1

GDP_GRRATE -0.1317 1

INFLAT -0.0645 -0.3513 1

REER 0.1124 0.5335 -0.6885 1

UNEMPL 0.1474 0.3401 0.3199 -0.2972 1

TAXRATE 0.1531 0.4787 -0.0942 0.4528 -0.4808 1

The table 3 represents the correlation among the

dependent and independent variables. As it can be seen in the

table above that all the relationships among the independent

variables must be less than 0.80 level (Gujarati, 2003).

Heteroscedasticity Statistics:

White's test for Ho: homoscedasticity against Ha:

unrestricted heteroscedasticity

chi2(10) = 7.87

Prob > chi2 = 0.6413

White test was conducted to check for the heterogeneity

problem. The above test clearly suggests that our regression

does not have heterogeneity problem as the results show

that the value is much higher than the level of significance in

terms of probability level.


152

Multicollinearity Statistics:

Table 4: Multicollinearity Statistics

Variance Inflation Factor (VIF) Test was conducted in order to check for the Multicollinearity in our results. As O’Brien (2007) argues that threshold value for the multicollinearity limit is between 0.05<VIF<5. So in that regard all the above variables remain in the required limits. Regression Results As our data is panel data, so for panel data analysis fixed and random effect least square regression technique is being used. Fixed Affect Panel Least Square:

Table5. Fixed Affect Panel Least Square

Dependent Variable Non-performing Loans (%)

Variables Name Label Coefficient p-values

MACRECONOMIC

FACTORS

GDP Growth Rate GDP_GRRATE -4.397848 0.01

Inflation Rate INFLAT 0.14966 0.048

Exchange Rate REER 34.591 0.003

Tax Rate UNEMPL 45.3797 0.00

Unemployment Rate TAXRATE 11.7243 0.056

Number of Observations 220

Prob > F 0

R-squared 0.242

Adj R-squared 0.1

Variables VIF

GDP_GRRATE 2.44

INFLAT 2.23

REER 3.36

UNEMPL 1.59

TAXRATE 1.84


153

The above table shows the regression relation between

dependent and its independent variables, NPL is being

regressed by GDP growth rate, Inflation rate, Real Exchange

Rate, Unemployment and Tax rate to find out its impact

using Fixed Effect Panel Least Square Method.

The R-square value is 18.82%. GDP growth rate has a

negative relation with NPL but it is statistically significant.

Inflation rate has a positive relation with NPL, it is also

statistically significant and at level 5%. Real Exchange Rate

has also a positive relation with NPL and it is statistically

significant at level 5%. Unemployment Rate has positive and

Tax Rate has also a positive relation with NPL and both are

statistically significant at 5% and 10% respectively.

Random effect Panel Least Square

Dependent Variable Non-performing Loans (%)

Variables Name Label Coefficient p-values

MACRECONOMIC

FACTORS

GDP Growth Rate GDP_GRRATE -4.4 0.009

Inflation Rate INFLAT 0.15 0.046

Exchange Rate REER 34.6 0.003

Tax Rate UNEMPL 45.38 0.00

Unemployment Rate TAXRATE 11.8 0.055

Number of Observations 220

Prob > F 0

R-squared 0.242

Adj R-squared 0.1

The R-square value is 17.70%. GDP Growth Rate has a

negative relation with NPL but it is statistically significant.

Inflation Rate has a positive relation with NPL, it is also

statistically significant. Real Exchange Rate has also a positive

relation with NPL and it is statistically significant at level 5%.

Unemployment has positive and Tax rate has also a positive


154

relation with NPL and both are statistically significant at 10%

and 5% respectively.

Hausman Test

Table 7: Hausman Test

chi2 =1.45

Prob>chi2 = 0.9841

In order to select between the fixed effect and random effect

least square regression as which will be more suitable

regarding our analysis. The insignificant probability value of

0.9841 clearly suggests that we fail to reject that the Random

effect as the suitable method of panel data regression

analysis technique.

Conclusion

Now the above results show a clear replication with the

literature as NPL has a significant negative relation with GDP

Growth rate, means that with the rise of the GDP growth

rate, the borrower’s ability to repay the loan will be

increased. Inflation rate has got the significant impact on the

NPL as concluded by our results. The high inflation rate

decreases the borrower’s ability to repay. It is responsibility

of the country to keep the GDP growth rate and inflation rate

in check as it greatly influence the abilities of the borrower to

repay the loans. If the NPL level gets rise because of these

variables it can lead to financial crises that can damage the

economic growth of the country badly.

Exchange rate can be used as a measuring tool for the

position of import and export within a country. The higher

the exports the more exchange rate will be received and the

country will be in better position not to buy foreign currency


155

for payment of the imports. In this process exchange rate is

considered as the tool to check the levels of the exports and

imports. The exchange rate has a positive relation with NPL.

The higher the level of exchange rate the higher will be the

level of NPL.

The global financial crises in 2008 has been triggered

mostly because of the crises in mortgage banking (Makri,

2015). The reason was the rise of the unemployment levels in

USA, most of the mortgage holders got unemployed

because of that they were unable to repay the mortgage

installments. In our analysis a positive significant relation was

established in the unemployment rate and NPLs levels in

Pakistan. A positive relation was analyzed between the Tax

rate and NPL ratio. The higher the level of the tax rate the

lesser will the ability of the borrower to repay the loans.

At the end, we may conclude that the government and the

State Bank of Pakistan have to play their roles in order to keep

the Levels of NPL within control, A strong role should be

played to keep the GDP growth rate on rise while at the same

time keep the Inflation rate, Exchange rate, Unemployment

rate and tax rate low. So that a sustainable financial and

economic growth can be achieved by the country.

Future Research

The following areas may be looked at for the future research.

Corporate governance should be checked in terms of its

impact of NPLs.

Institutional factors should also be taken into

consideration as it may also contribute to the changing

nature of NPLs.

Time span can be increased to see its long term impact

and its influence by different variables.


156

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Mudassir Mukhtar*

Noshina Saleem**

Stephen D. McDowell***

Critical Boundaries of Activism in Public

Relations in Pakistan: A Comparative Analysis of

Effects of Professional Practices

ABSTRACT

This paper explores that how do professional and craft public

relations practices affect department level of involvement to deal

with the activist pressure in public and private sector

organizations in Pakistan. The effects of role and model

preferences in Pakistan are discussed in the light of assumptions

of excellence theory of public relations. Models preferences are

discussed within the parameters of four western models

including press a gentry, public information, two-way

asymmetrical and two-way symmetrical. Similarly, role

preferences are elaborated within two major (manager and

technician) and two minor roles (media relations and

communication Liaison).

The population of interest are highest ranking public

relations practitioners heading public relations departments in

public and private sectors organizations in Pakistan. Data is

* PhD Scholar, Institute of Communication Studies, University of the

Punjab, Lahore **

Assistant Professor, Institute of Communication Studies, University of

the Punjab, Lahore ***

Associate Dean, College of Communication and Information, Florida

State University, Tallahassee, Florida USA


166

collected through a national survey using a random sample of

101 practitioners.

Results support the major assumptions of the excellence

theory. Although practitioners are using all four models as per

their expertise to involve with the activist pressure but

symmetrical communication proved comparatively most

effective in dealing with activist pressure in public and private

sector organizations in Pakistan.

Keywords: PR in Pakistan, PR Models, PR Roles, PR and

Activism

Introduction

Any group consisting more than one person that has the

potential to create effects or impact on any organization is

called an activist group. Pressure tactics of activists’ groups

involve forces like edification, negotiation and persuasion to

generate desire effects on organizations. Being an outside

stimulus, activists’ groups challenge organizational functioning

to improve its policies and actions. On the other hand, public

relations infrastructures within organizations offer their

expertise as inside agents to improve organizational

functioning. The corporations and government agencies do not

want to surrender their autonomy while negotiating with the

activist groups and thus activists’ groups pose competitive

threats and challenges to organizations in this market

economy era (Grunig et al., 2003; Grunig, J., 2008; Grunig, J.,

& Grunig, L., 1992).

Public relations literature has elaborated different

viewpoints about activism and activist pressure. Mostly

shared views discuss the reasons behind the existence of

Mudassir Mukhtar, Noshina Saleem & Stephen D. McDowell

167

activist groups and the kind of threats they pose to

corporations and government agencies. Obligations of public

relations practitioners to ensure public interest while dealing

with activism within organizations are also widely discussed.

Activism as main paradigm of critical public relations and its

recognition against mainstream corporate public relations is

also one of the most sought subjects (Uysal &Yang, 2013; De

Moya & Bravo, 2016).

Public relations set ups within organization employ

different models to deal with the forces of activism. Larisa, A.

Grunig (2013) examined and analyzed the ability of the four

models of the excellence theory while observing the effects

of activism in organizations. Her results proposed following

assumptions:

a. Organizations feel hostility towards activists’ groups and

vice versa and similarly both blame media for providing

advantage of coverage to the other.

b. Organizations accept the power of activist groups and

their reputation is vulnerable to be damaged by the

activists’ groups.

c. Public relations tools are practiced by both activists’ groups

and organizations. But organizational engagement with

public relations is more obvious and visible as compare to

activist groups side.

d. Activist actions directly create pressure on organizational

policy making process and there are few organizations

those deny outside pressure of any group.

e. Organizations excessively employ Grunig and Hunt (1984)

four models of public relations with varying combinations

and tendencies to deal with activist groups.

f. Two-way symmetrical models are not the only choice by

organizations while dealing with activists’ pressure but


168

organizations employ any of the models as per their need

and expertise.

g. Preference of two-way asymmetrical model by practitioners

for issue management cannot be taken as a thumb rule as

sometimes they rely on one-way models.

h. The results did not provide enough evidence to support

or reject the rare position of two-way symmetrical model

to be used effectively against pressure groups.

Thus, the relationship between activism and public relations

was discussed during the assumptions of two-way

symmetrical model in Excellence theory. This theory also

discussed the possibilities of using a-symmetrical model when

symmetrical communication failed to counter activist’s

concerns against corporate interests (Grunig et al., 2013;

Grunig and Hunt, 1984; Grunig et al., 1995; Grunig et al., 2002;

Grunig et al., 2003).

History of activism is rooted in the abolition movement of

the 19th century (Heath, Toth & Waymer, 2009). Classical

roots of activism in Pakistan can be linked to left wing

movement of the decade of seventies (Mubarik, A., 2012).

While the contemporary practices of activism are reflected by

the Justice Movement at the start of the new millennium

(Jammiluddin, Mufti, A., 2011). Coombs & Holladay (2012)

elaborated characteristics of activism as main force of critical

public relations and its differences from mainstream public

relations. Further he threw light on the shift of the field of

public relations from profitable to non-profitable status.

This paper elaborates how do professional models and

roles practices by public relations departments/practitioners

effect their level of involvement to deal outside activist

pressure. Pakistan is a democracy with weak institutional

infrastructures. Although the professional growth of public


169

relations field is on the rise in Pakistan but still most of the

public relations departments within organizational setups

have inappropriate professional structures. Due to lacking

professional infrastructures of public relations, organizations

in Pakistan are more vulnerable to deal with and survive

against outside activist pressure. Although the public

relations departments involve the outside activist groups to

fulfill their organizational objectives but the success rate is

not calculated using rational professional scales.

Professional and craft public relations practices are

reflected in the light of the excellence theory. The

excellences theory discusses the employment of four public

relations models and four public relations roles. These four

models included Press agentry, public information, two-way

asymmetrical and two-way symmetrical. Press agentry and

public information models are referred as one-way models

while two-way asymmetrical and two-way symmetrical

models are referred as symmetrical models (Grunig, J.,1976;

Grunig, J.,1984; Grunig, J.,1997; Grunig, J., 2001). These four

roles comprised manager, technician, media relations and

communication liaison role. Professional public relations

means practicing symmetrical models () and craft public

relations means practicing one-way models and similarly

manager role enactment is professional public relations while

technician role enactment is craft public relations (Grunig et

el, 2013; Broom & Dozier, 1986; Cutlip, Center & Broom,

2000; Dozier, M., 1984; Dozier & Broom, 1995).

RQ1: How do model usage and role adoption patterns affect

departmental level of involvement with the activist group?

RQ2: How do experience and dealing with activist groups

(level of activist pressure) differ in public and private sectors?


170

Methods

The population of interest are highest ranking public

relations practitioners heading public relations departments

in public and private sectors organizations in Pakistan. Data

is collected through a national survey using a random

sample. Total analyzable responses collected at the end of

the survey were 101. Each model and role construct was

made up of four items while activist pressure construct was

consisted of eight items. Each item was answered on a five-

point Likert scale.

Results and Analysis

RQ1: How do model usage and role adoption patterns affect

departmental level of involvement with the activist group?

To explore the theoretical model explaining significant

effects of model usage and role adoption patterns on

departmental involvement with the activist pressure, one-

way between-groups analysis of variance with post-hoc tests

was conducted between model/roles constructs and

involvement with activist pressure construct. Activist pressure

construct was treated as dependent variables while model/

roles constructs were considered as independent variables.

The results of the F-test clarified that when organizations/

practitioners employed any model/role, how did it affected

their practical concerns and intensity of involvement with the

activist group and in other words how successful or failed it

proved against different aspects/activities/actions/measures

(items) taken to deal with the activist pressure.


171

To meet the requirements of Anova, all model and role

variable were transformed into categorical form using visual

binning option in SPSS. All model and roles variables were

divided into three categories each. Models variables

categories included low or no usage (1. <= 2.97), moderate

usage (2 = 2.98 - 3.99) and high usage (3= 4.00+). Similarly,

roles variables categories included low or no adoption (1. <=

2.97), moderate adoption (2 = 2.98 - 3.99) and high adoption

(3= 4.00+).

The results of one-way analysis of variance concluded that

three models including press agentry, public information and

two-way asymmetrical models (independent variables) were

not significantly affecting PR departmental level of

involvement with the activist group. Thus, out of four models,

three models were insignificant with the dependent variable

of involvement with the activist pressure. PR departmental

level of involvement with the activist group was not

dependent on the intensity of usage of these models.

The only model that was significantly affecting PR

departmental level of involvement with the activist group

was two-way symmetrical model. The significance level of

two-way symmetrical model (F=3.658, p=.029) with the

involvement of the activist group is interpreted in Table 1.

There was a statistically significant difference at the p<.05

level in involvement with the activist scores for three

categories of two-way symmetrical model usage. The effect

size was calculated using eta squared and it was medium

(.07). Post-hoc comparisons using the Tukey HSD test

specified that mean score for category 1 (M=3.22, SD=.81)

was significantly different from mean score of category 3


172

(M=3.65, SD=.42). Category 2 (M=3.51, SD= .75) did not

differ significantly from either category 1 or 3.

Thus, the public relations departments/ practitioners with

high usage of two-way symmetrical model were more

involved with the activist group as compare to public

relations departments/ Practitioners with low or no usage of

this model. Table 1.1. interpreted the post-hoc comparisons.

Table 1: One-way ANOVA between Involvement with the

Activist Group and Two-way Symmetrical Model of Public

Relations

Sum of

Squares df

Mean

Square F Sig.

Between Groups 3.531 2 1.765 3.658 .029

Within Groups 47.297 98 .483

Total 50.827 100

Table 1.1. Multiple Comparisons for Dependent Variable:

Involvement with the activist group

And Independent Variable: Two-way symmetrical model

Tukey HSD (I) Two-Way

Symmetrical

Model of Public

Relations

(Binned)

(J) Two-Way

Symmetrical

Model of Public

Relations (Binned)

Mean

Difference (I-J) Std. Error Sig.

95% Confidence

Interval

Lower

Bound

Upper

Bound

1 <= 2.97 2 2.98 - 3.99 -.296 .169 .193 -.699 .107

3 4.00+ -.428* .164 .029 -.819 -.036

2 2.98 - 3.99 1 <= 2.97 .296 .169 .193 -.107 .699

3 4.00+ -.132 .181 .748 -.563 .299

3 4.00+ 1 <= 2.97 .428* .164 .029 .036 .819

2 2.98 - 3.99 .132 .181 .748 -.299 .563

*. The mean difference is significant at the 0.05 level.


173

To better explain more involvement of the public

relations department with the activist group while high

employment of two-way symmetrical model, one-way

analysis of variance was conducted between categories of

two-way symmetrical model usage (independent variable)

and all items of involvement with the activist groups

(dependent variables). Out of eight items of the involvement

with the activist group, five items were significant at p<.05

level with the usage of two-way symmetrical models. These

items included “my organization was successful at reaching

its goal” (F= 2.419, p=.041), “my organization researched the

activist group in our response to their pressure” (F=4.762,

p=.011), “a special program was developed to respond to the

activist group” (F=3.679, p=.029), “the activist group had

direct involvement in planning our organization’s response

to them” (F=5.583. P=.005) and “my organization always

evaluates its response to activist groups” (F=5.776, p=.004).

The effect sizes calculated through eta squared for these five

items were small including .02, .04, .03, .05 and .05

respectively.

The post-hoc comparisons calculated through Tukey HSD

specified that the mean score of item “my organization was

successful at reaching its goal” was significantly different for

category 1 (M=3.79, SD= .90) and category 3 (M=4.13,

SD=.43). It concluded that public relations departments/

practitioners with high usage of two-way symmetrical model

were more significantly successful in accomplishing their

organizational goals against activist pressure than those with

low or no usage of the model.


174

The mean score of item “my organization researched the

activist group in our response to their pressure” was

significantly different for category 1 (M=3.12, SD= 1.29) and

category 2(M=3.79, SD=1.07) and category 1(M=3.12, SD=

1.29) and category 3 (M=3.81, SD= .75). It determined that

public relations departments/practitioners with moderate

and high usage of two-way symmetrical model were more

significantly involved in researching activist pressure to

better respond than those with low or no usage of the

model.

The mean score of item “a special program was

developed to respond to the activist group” was significantly

different for category 1 (M=3.12, SD= 1.45) and category

3(M=3.87, SD=.67). It determined that public relations

departments/practitioners with high usage of two-way

symmetrical model were more significantly involved in

developing a special program to respond to activist group

than those with low or no usage of the model.

The mean score of item “the activist group had direct

involvement in planning our organization’s response to

them” was significantly different for category 1 (M=2.50,

SD=1.25) and category 2 (M=3.18, SD=1.06) and category

1(M=2.50, SD=1.25) and category 3(M=3.26, SD=.77).

It determined that public relations departments/

practitioners with moderate and high usage of two-way

symmetrical model were more significantly involving the

activist group in planning organizational response than those

with low or no usage of the model.


175

Table 1.2: One-way ANOVA between Involvement with the

Activist Group items and Two-way Symmetrical Model of

Public Relations

Sum of

Squares df

Mean

Square F Sig.

“My organization has

received tremendous

pressure from

outside activist

groups

Between Groups 2.656 2 1.328 1.302 .277

Within Groups 99.978 98 1.020

Total

102.634 100

The activist group

was successful at

reaching their goal.”

Between Groups .168 2 .084 .077 .926


Total 107.168 100

“My organization

was successful at

reaching its goal.”

Between Groups 2.727 2 1.363 2.419 .041


Total 57.960 100

“The entire

organization,

including senior

management and

other employees,

was involved in the

response to the

activist group.”

Between Groups 2.088 2 1.044 .897 .411


Total

116.158 100

“My organization

researched the

activist group in our

response to their

pressure.”

Between Groups 11.270 2 5.635 4.762 .011


Total

127.228 100

“A special program

was developed to

respond to the

activist group.”

Between Groups 10.276 2 5.138 3.679 .029


Total 147.129 100

“The activist group

had direct

involvement in

planning our

organization’s

response to them.”

Between Groups 12.824 2 6.412 5.583 .005


Total

125.366 100

“My organization

always evaluates its

response to activist

groups.”

Between Groups 12.780 2 6.390 5.776 .004


Total 121.188 100


176

The mean score of item “my organization always evaluates

its response to activist groups” was significantly different for

category 1(M=3.19, SD=1.23) and category 3 (M=4.03,

SD=.60). It determined that public relations departments/

practitioners with high usage of two-way symmetrical model

were more significantly involved in evaluating their response to

activist pressure than those with low or no usage of the model.

The results of one-way analysis of variance also

concluded that three roles including technician, manager

and media relations roles (independent variables) were not

significantly affecting PR departmental level of involvement

with the activist group. Thus, out of four roles, three roles

were insignificant with the dependent variable of

involvement with the activist pressure. PR departmental level

of involvement with the activist group was not dependent on

the intensity of engagement of these roles.


Activist Group and Communication Liaison Role of Public

Relations

Sum of

Squares df

Mean

Square F Sig.

Between Groups 5.343 2 2.672 5.757 .004


Total 50.827 100

Table 1.3. interpreted that communication liaison role

was significant (F=5.757, p=.004) with the involvement with

the activist group. There was a statistically significant

difference at the p<.005 level in involvement with the activist

scores for three categories of communication liaison role

adoption. The effect size was calculated using eta squared

and it was large (.1). Post-hoc comparisons using the Tukey


177

HSD test specified that mean score for category 1 (M=2.93,

SD= .54) was significantly different from mean score of

category 3 (M=3.59, SD= .76). Category 2 (M=3.39, SD= .59)

did not differ significantly from either category 1 or 3.

Thus, the public relations departments/ practitioners with

high adoption of communication liaison role were more

involved with the activist group as compare to public

relations departments/Practitioners with low or no adoption

of this role. Table 1.4. interpreted the post-hoc comparisons.

Table 1.4: Multiple Comparisons between Dependent Variable:

Involvement with the activist group and Independent Variable:

Communication Liaison Role Tukey HSD

(I) Communication

Liaison Role of

Public

Relations (Binned)

(J) Communication

Liaison Role of

Public Relations

(Binned)

Mean

Difference

(I-J)

Std.

Error Sig.

95% Confidence

Interval

Lower

Bound

Upper

Bound

1 <= 2.97 2 2.98 - 3.99 -.46563 .21318 .079 -.9730 .0417

3 4.00+ -.66991* .19884 .003 -1.1431 -.1967

2 2.98 - 3.99 1 <= 2.97 .46563 .21318 .079 -.0417 .9730

3 4.00+ -.20428 .15198 .374 -.5660 .1574

3 4.00+ 1 <= 2.97 .66991* .19884 .003 .1967 1.1431

2 2.98 - 3.99 .20428 .15198 .374 -.1574 .5660

*. The mean difference is significant at the 0.05 level.

To better explain more involvement of the public relations department with the activist group while high adoption of communication liaison role, one-way analysis of variance was conducted between categories of communication liaison role (independent variable) and all items of involvement with the activist groups (dependent variables). Out of eight items of the involvement with the activist group, four items were significant at p<.05 level with the adoption of communication liaison role. These items included “my organization researched the activist


178

group in our response to their pressure” (F=6.070, p=.003), “a special program was developed to respond to the activist group” (F=15.127, p=.000), “the activist group had direct involvement in planning our organization’s response to them” (F=3.459, p=.035) and “my organization always evaluates its response to activist groups” (F=10.471, p=.000). The effect sizes calculated through eta squared for three items were large including .10, .20 and .17 respectively. The effect size for item “the activist group had direct involvement in planning our organization’s response to them” was medium (.06). The post-hoc comparisons calculated through Tukey HSD specified that the mean score of item “my organization researched the activist group in our response to their pressure” was significantly different for category 1 (M=2.67, SD=1.05) and category 2(M=3.50, SD=1.14) and category 1(M=2.67, SD=1.05) and category 3 (M=3.76, SD=1.04). It was determined that public relations departments/ practitioners with moderate and high adoption of communication liaison role were more significantly involved in researching activist pressure to better respond than those with low or no adoption of this role. The mean score of item “a special program was developed to respond to the activist group” was significantly different for category 1 (M=2.13, SD=.92) and category 2(M=3.44, SD=1.24) and category 1 (M=2.13, SD=.92) and category 3(M=3.85, SD=1.00). It was determined that public relations departments/practitioners with moderate and high adoption of communication liaison role were more significantly involved in developing a special program to respond to activist group than those with low or no adoption of this role. The mean score of item “the activist group had direct involvement in planning our organization’s response to them” was significantly different for category 1 (M=2.40, SD=1.12) and category 3(M=3.17, SD=1.16). It was determined that public relations departments/practitioners with moderate and high employment of communication liaison role were more significantly involving the activist


179

group in planning organizational response than those with low or no adoption of this role. The mean score of item “my organization always evaluates its response to activist groups” was significantly different for category 1(M=2.47, SD=1.36) and category 2 (M=3.53, SD=1.08) and category 1(M=2.47, SD=1.36) and category 3(M=3.81, SD=.85).


Activist Group Items and Communication Liaison Role of

Public Relations

Sum of

Squares Df

Mean

Square F Sig.

“My organization has

received tremendous

pressure from outside

activist groups.”

Between Groups .525 2 .263 .252 .778


Total 102.634 100

“The activist group was

successful at reaching

their goal.”

Between Groups 1.479 2 .740 .686 .506


Total 107.168 100

“My organization was

successful at reaching its

goal.”

Between Groups .579 2 .289 .494 .611


Total 57.960 100

“The entire organization,

including senior

management and other

employees, was involved in

the response to the activist

group.”

Between Groups .121 2 .061 .051 .950


Total

116.158 100

“My organization

researched the activist

group in our response to

their pressure.”

Between Groups 14.024 2 7.012 6.070 .003


Total 127.228 100

“A special program was

developed to respond to

the activist group.”

Between Groups 34.706 2 17.353 15.127 .000


Total 147.129 100

“The activist group had

direct involvement in

planning our organization’s

response to them.”

Between Groups 8.266 2 4.133 3.459 .035


Total 125.366 100

“My organization always

evaluates its response to

activist groups.”

Between Groups 21.338 2 10.669 10.471 .000


Total 121.188 100


180

It was determined that public relations departments/

practitioners with moderate and high adoption of

communication liaison role were more significantly involved

in evaluating their response to activist pressure than those

with low or no adoption of this role.

RQ2: How do experience and dealing with activist groups

(level of activist pressure) differ in public and private sectors?

The results of the independent sample T-test concluded

that the volume of activist pressure and intensity of

experiences with it remains same across public and private

sector organizations in Pakistan. The scores of activist

pressure resulted in no significant differences for public-

sector organizations (M=3.40, SD=.82) and private-sector

organizations (M=3.46, SD=.60; t (91.436) = -.374, p=.709

(two-tailed) in Pakistan.

Table 2: Independent Sample T-Test for Level of Activist

Pressure and Organizational Sector (Public/Private)

Equal variances

not assumed

N Mean SD T Df Sig (2-tailed)

101 -.05 .14 -.374 91.436 .709

Discussion and Conclusion

Activists pose similar kind of threats to public and private

sector organizations in Pakistan. Public relations departments

also have to absorb similar amount of activist pressure.

Response from majority (72%) of the PR departments reflected

that activists’ groups pose tremendous pressure on these

departments. Likewise, majority of the departments (89%)


181

believed that their success rate is better to attain their

organizational objectives against activists’ goals. Only a less

number of departments (21%) were of the view that activist’s

groups remain successful to achieve their goals. Slightly, more

half number of departments (59%) were of the view that “entire

organization, including senior management and other

employees, remain involved in dealing with activist group”.

Similarly, more than half number of the departments (59%)

replied that “our organization investigates the activist group in

our response to their pressure”. Fifty-eight % of the

departments answered that “they develop a special program

against activist pressure”. Thirty-one % of the departments

responded that “the activist group has direct involvement in

planning our organization’s response to them”. Fifty-five % of

the departments responded that “they always evaluate their

response to activist groups”.

To counter pressure from outside activists’ groups,

Grunig and Hunt’s (1992) four models are employed by PR

departments in Pakistan. Out of four models, three models

(press agentry, public information and two-way

asymmetrical) are insignificant with the involvement of public

relations department with activist group. Thus, variations in

the usage of these models do not affect the level of

involvement with the activist pressure.

The only model that produces significant effects on the

level of involvement with the activist pressure is two-way

symmetrical model. Two-way symmetrical model is

considered the most efficient against activist pressure. high

usage of two-way symmetrical model to deal with the activist

pressure results in more success of organizational objectives

while low or no usage results in less and no success. Thus, PR

departments employing two-way symmetrical model are


182

significantly more successful in dealing with the activists’

groups than PR departments with less or no employment of

this model. PR departments employing two-way symmetrical

model are significantly more successful because they

generate significantly more research based activities to

identify and tackle activist group, produce and implement

significantly more research oriented programs, involve with

the activists group in a more significantly direct way and

evaluate their response significantly more rationally than PR

departments with less or no employment of two-way

symmetrical model.

It can be concluded that employment of two-way

symmetrical model by PR departments in Pakistan to deal

with activist pressure is major justification behind their

success to gain their objectives against activism. But

employment of one-way models by PR departments in

Pakistan to deal with the activist pressure becomes a reason

for failure against activist pressure. Results indicate that

activist pressure can be effectively dealt by applying two-way

symmetrical model and in other words activist pressure acts

as a stimulus to force organization to employ excellent

public relations (Grunig, 2013).

The results of this paper can be related with Larisa, A.

Grunig (2013) assumptions. Activists groups can potentially

damage organizational reputation and prestige of

organizations in Pakistan by poisoning public opinion

against them.

Activist activities have a direct effect on organizational

image in Pakistan and there are few organizations those do

not feel difficulty in facing outside pressure of any group.

Organizations in public and private sectors in Pakistan do

employ Grunig and Hunt (1984) four models of public


183

relations with varying combinations and tendencies to deal

with activist groups. Two-way symmetrical models are not

the preferred choice of organizations in Pakistan to counter

activists pressure but they prefer use any of the models as

per their need and expertise.

The results of this paper also contributed that the only

significant role in organizations in Pakistan that is efficient and

effective in dealing with the activist pressure is communication

liaison role. More intensive employment of communication

liaison role by public PR departments secure more effective

results against activist pressure than low or no engagement of

this. The justifications for this compatible effectiveness are

more departmental involvement in research based tasks, more

implementation of specific programs, more proactive planning

about activist groups and more proactive evaluation of

departmental action before implementation against activist

group targeting. The results also concluded that technician,

manager and media relations roles are potentially insignificant

for countering the activist pressure. The PR departmental

effectiveness is not dependent on the high or low engagement

with these roles.


184

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