QUALITY AND LEVEL OF RISK MANAGEMENT EXPOSURE AND ITS IMPLICATIONS: EVIDENCE FROM PAKISTAN

This study explores the simultaneous association among quality of risk management exposure, cost of capital, and capital structure in Pakistan. The data comprises of 92 non-financial firms spanning over five years (2010-2014) listed on the Pakistan Stock Exchange (PSE). The generalized method of moments (GMM) is used to study endogenous relationship between variables and first lags are used as instruments. The findings are congruent with the recent research on the said topic. The findings indicate that simultaneous relationship exists among quality of risk management exposure, cost of capital and capital structure. The major implication emerging from these findings suggest that firms should try to maintain an optimum level of capital structure which minimizes the cost of capital and ultimately these two will help to manage risk enhancing the value of firm.