Title: Market uncertainty and distance to default of non-financial firms in Pakistan

Authors: Qasim Saleem; Zeeshan Ahmed; Maria Noreen; Arslan Aslam

Addresses: GIFT Business School, GIFT University Gujranwala, 052250, Pakistan ' Department of Management Sciences, University of Lahore, Gujrat Campus, Pakistan ' Department of Management Sciences, University of Lahore, Gujrat Campus, Pakistan ' Department of Management Sciences, University of Lahore, Gujrat Campus, Pakistan

Abstract: The purpose of this study is to provide new facts about the interaction between distance to default (DtD) and the uncertainty for non-financial firms in Pakistan. For this purpose, the study chose the non-financial firms that issued TFCs over the period 2006 to 2018. The data was collected from the financial statements of firms and daily stock prices from the stock market. Three measures of uncertainty, like stock return volatility, stock market volatility, and systematic risk, are used for empirical testing of the hypothesis. A panel data technique is used, which indicates that stock return volatility, stock market volatility, and systematic risk positively affect the DtD of firms listed on the Pakistan Stock Exchange (PSE). The chances of default increase in case of uncertainty in the market. These findings are beneficial for regulators in formulating the measures to ensure the stability of non-financial firms that play a significant role in economic growth.

Keywords: DtD; distance to default; stock return volatility; stock market volatility; systematic risk; PSE; Pakistan Stock Exchange.

DOI: 10.1504/IJTGM.2022.128113

International Journal of Trade and Global Markets, 2022 Vol.16 No.1/2/3, pp.59 - 72

Received: 04 Apr 2020
Accepted: 27 Jun 2020
Published online: 06 Jan 2023 *

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