Master of Business Administration Executive

Faculty / School

School of Business Studies (SBS)


Department of Finance

Year of Award



Dr. Sana Tauseef, Associate Professor and Chairperson Department of Finance

Project Type

MBA Executive Research Project

Access Type

Restricted Access

Executive Summary

This study addresses the issue of low investor participation at the Pakistan Stock Exchange (PSX) Growth Enterprise Market (GEM) Board. This study has approached the lower participation level from both, the investor end and the listing end and has attempted to explain the dominant reasons why investors have been reluctant to participate in the GEM board and why companies have been reluctant to list. While substantial amount of work has been done on exploring investor behaviour and to explain the driving factors behind investor’s investment decision, very few have examined this from a speciality board perspective such as the PSX GEM board, a board developed to specifically encourage Small and Medium Enterprises (SME) to raise capital on the equity market. Therefore, the primary purpose of this study was to find out, in an exploratory manner, the impact of an investor’s demographics, financial knowledge, risk & return appetite, trust, familiarity and the propensity to follow popular narratives (herding behaviour) on investment behaviour. The Binary Logistic Regression model was applied to analyze the data and observe the predictive role of the aforementioned factors on decision making of a retail investor. A sample of 203 individuals was collected, that included current PSX main board investors, GEM Board investors and potential investors. Data was collected through a questionnaire and respondents were recruited via brokerage houses and subsequently via snowballing technique since GEM investors are few by far.

The latter part of this research aimed to explore the perception and existing opinion of the potential listees on the GEM board, the SMEs particularly from the Technology and IT sectors. The goal was to identify underlying considerations and perceptions of the decision makers of these organizations regarding raising capital on the PSX GEM board. Exploratory interviews were conducted at PSX, capital market regulator representatives, IT companies’ board representatives & executives, brokers and subject matter experts to understand the consideration, the thought process and need scope of the listees and how accurately the GEM board may or may not fulfil their requirements.

The study has revealed significant influence of perceived financial knowledge of an investor on their investment behavior and higher knowledge perception is linked with greater willingness to invest on GEM board, alongside the main board. Higher trust level has been found to be linked with greater willingness to invest, with a 40% probability of investment in GEM board by investors with higher trust level, compared to 34% probability of investment x in PSX Main board. Advisory and information sources have also been found to be important in an investor’s decision, with confidence in advisory information being linked with investment decision. Herding behavior has also been observed, as investors indicate higher desire to invest if “others” are investing as well. Risk and return are also found to be significant with lesser risk and higher return perception encouraging investment, signaling risk aversion and overall low risk appetite. Investor’s age, higher investment experience and education level are also found to increase chances of investment on the GEM board. Given the minimum net worth criteria of PSX GEM board investors, higher net worth is shown to lead to greater investment, as it is a basic qualifying criterion. Furthermore, knowledge and education are also found to be correlated in terms of influencing investment behavior.

From the listing’s perspective, low number of listings on GEM board, lack of liquidity in the market, undocumented SME sector, strict compliance check, apprehension of undervaluation and undersubscription, economic and political instability are seen as major deterrent for companies to get listed on the GEM board. Furthermore, inadequate support from the government, disclosure requirements for listing, cost of listing on GEM board, and fear of dilution of owners’ equity create reluctance in companies to list on GEM board.

Overall, it has been observed that GEM board, although in an infancy stage, requires further extensive efforts from policy makers, governments, and regulators alike. Policy reforms, higher awareness, establishment of a certain amount of “brand equity”, proper knowledge impartment to the masses, ease of listing and investing process, and a clear vision from companies regarding future direction, which is only possible though socioeconomic stability, can potentially increase PSX GEM board’s attractiveness as an investment and capital raising avenue.


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Available for download on Tuesday, July 16, 2030

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