Policy Intervention and Financial Sustainability in an Emerging Economy: A Structural Vector Auto Regression Analysis

Sarah Ahmed; Nazima Ellahi; Ajmal Waheed; Nida Aman

doi:10.3389/fpsyg.2022.924545

Policy Intervention and Financial Sustainability in an Emerging Economy: A Structural Vector Auto Regression Analysis

Front Psychol. 2022 Aug 5:13:924545. doi: 10.3389/fpsyg.2022.924545. eCollection 2022.

Authors

Sarah Ahmed¹, Nazima Ellahi², Ajmal Waheed³, Nida Aman⁴

Affiliations

¹ Department of Business Administration, Foundation University Islamabad, Islamabad, Pakistan.
² Department of Economics and Finance, Foundation University Islamabad, Islamabad, Pakistan.
³ Faculty of Management Sciences, Foundation University Islamabad, Islamabad, Pakistan.
⁴ Management Sciences, Bahria University, Islamabad, Pakistan.

Abstract

The purpose of the study is to observe the impact of policy intervention on financial sustainability using the structural vector autoregression (SVAR) analysis. The population of the study is the manufacturing sector of Pakistan, which is an emerging economy. Data for 249 firms operating in the manufacturing sector are taken, collected from Datastream from 2005 to 2019, with total observations of 2,400. To conduct the analysis, R software is used for its better visualization. Results show that firm performance, corporate governance, and sectoral policies have a positive and long-term impact on financial sustainability, whereas earning management and financialization not only have a negative impact, but this impact affects the operations of the corporate for a longer period. This study would be helpful for policymakers as it gives a framework for financial sustainability based on the policies and strategies developed by the sector.

Keywords: R software; SVAR; corporate governance; financial sustainability; financialization; firm performance; impulse response function; sectoral policies.