IMPACT OF CASH FLOW ON FIRM PERFORMANCE UNDER CAPITAL MARKET IMPERFECTIONS: EVIDENCE FROM PAKISTANI LISTED MANUFACTURING FIRMS

In the present research work the relationship is measured between the cash flow and firm performance by taking the 137 non-financial manufacturing firms listed in the Pakistan Stock Exchange (PSX) during the period of 10 years 2006-2015.The relationship is measured two times in the presence and in the absence of capital market imperfections. Capital market imperfections cannot be measured directly, so to measures these imperfections three proxies such as institutions ownership, firm's size and liquidity can be used. Firm performance was measured with the help of return of assets and return on equity. To check the relationship among the cash flow and firm performance panel data regressions are used. The result shows a positive significant relationship among the cash flow and firm performance, but the relation is more indicates that a firm can more rely on its internal funds and cash flow in the presence of these capital market imperfections. affirmative and significant in the presence of capital market imperfections. It indicates that a firm can more rely on its internal funds and cash flow in the presence of these capital market imperfections.