The Determinants of High Performing Firms in Pakistan

Abstract

This study empirically investigates the determinants of the high performing firms of the Pakistan. To evaluate the relationship of firm’s performance with other factors, cross-sectional data of World Bank Enterprise Survey (WBES) 2013 was used and multiple regression analysis was carried out to estimate the affect of independent variables on the annual sales of the firm. Based on the results achieved through multiple regression analysis, firms can perform significantly better by taking strong measures to impose the practice of significant variables which in our case are the Internationally recognized Quality Certificate and the Financial Statements checked by an External Auditor. Results from the multiple regression analysis suggest that Quality certificate and External Auditor can increase the sales of a firm in Pakistan by 1.5 and 1.6 units respectively. Other variables mostly came out to be statistically insignificant highly because of the poor quality and quantity of data available for the firms in Pakistan. In some cases, data is under reported to deceive tax officials and pay lower amount of taxes. It has also been witnessed for some cases that tax officials were caught in bribery charges for not reporting the actual figures of the operations. For the case of R & D spending, there is little to no spending on the innovation activities in Pakistan and that is largely because of the availability of cheap Chinese products in the market or high costs of research projects. Due to these above mentioned reasons, our model could not accurately comprehend the true effects of the variables and therefore it is highly recommended to the government that data collection need to be managed efficiently and a strong regulatory authority need to be established to look into all the operations of the firms.