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PurposeThe purpose of this paper is to evaluate the degree to which Islamic banks in Pakistan use risk management practices (RMPs) and techniques in dealing with different types of risk.Design/methodology/approachA standardized questionnaire is used which covers six aspects: understanding risk and risk management (URM), risk assessment and analysis (RAA), risk identification (RI), risk monitoring (RM), credit risk analysis (CRA) and RMPs.FindingsThis study found that the Islamic banks are somewhat reasonably efficient in managing risk where URM, RM and CRM are the most influencing variables in RMPs.Research limitations/implicationsThe paper's findings are limited to the RMPs of Islamic banks in Pakistan.Originality/valueThis paper explores the RMPs of the Islamic banks in Pakistan. The results can be used as a valuable feedback for improvement of RMPs in the Islamic banks in Pakistan and will be of value to those people who are interested in the Islamic banking system.

The purpose of this paper is to investigate the relationship between firm's liquidity and profitability; and to find out the effects of different components of liquidity on firms' profitability.The relationship between liquidity and firms' profitability is empirically examined by collecting the data of 50 listed firms of Karachi Stock Exchange, Pakistan. Panel data has been collected from secondary sources for the year 2007 to 2011 .Net operating income and Return on assets are used measure of firm's profitability. Liquidity of the firm is measured by using cash gap in days and current ratio. Firm size measured by net sales, total assets and market capitalization .The study applies regression analysis to determine factors affecting profitability. Incremental tests are carried out to see the importance of individual variables in the model.The results of correlation and regression analysis showed that there is a significant negative relationship between cash gap and return on assets while current ratio has significant positive relationship with profitability. Results further indicate that log of sales and log of total assets has positive significant relationship with profitability. The findings of this study are based on firms listed on the Karachi Stock Exchange (KSE). Hence, the results cannot be generalizable to those firms which are not listed on Karachi stock exchange. The sample of the study comprises only the merchandising and manufacturing firms. Banks are excluded due to their nature of work.

This paper presents an analysis of smallholders’ access to rural credit and the cost of borrowing using survey data from Pakistan. Rural credit in Pakistan comes from formal and various informal sources. The tenure status, family labor, literacy status, off-farm income, value of non-fixed assets and infrastructure quality are found to be the most important variables in determining access to formal credit. On the other hand, the total operated area, family labor, literacy status and off-farm income are found to be the most important factors in determining the credit status of the smallholders from informal sources. The results show that the cost of borrowing from formal sources falls as the size of holding increases. The analysis confirms the importance of informal credit, especially to the smallest of the smallholders and tenant cultivators.

Purpose -This paper aims to investigate the impact of FDI on the stock market development in Pakistan, both aggregate as well as sector wise, the reason being that no such work has been carried out in this context. Design/methodology/approach -The study is based on secondary data for the period 1985-2011. Johansen co-integration approach is used for determining relationship among variables for aggregate stock market development in long run. Granger causality test is also applied to check the causal relation between the variables. Correlation analysis and regression analysis has been used for examining the relationship of sector wise development, FDI and economic growth in Pakistan. Findings -The results support the positive role of FDI in boosting the aggregate stock market development in long run. Bi-directional causality between FDI and economic growth has been found along with the uni-directional causality between aggregate stock market development and economic growth. For sector wise development the relationship of FDI is positive in the sectors where FDI concentration is high in recent years whereas and negative in other sectors. Originality/value -Co-integration coefficients showed a positive and statistically strong relationship between FDI and aggregate market capitalization thus reflecting the complementary role of FDI in the stock market development of Pakistan.