Description

The present study is a blend of development financing and economic governance. It develops a theorem, identifying antecedent variables which can better expound the given phenomenon. It has now come into the fact that investment position in a country may be improved if corporate sector plays its rigorous role to convert its earnings into investment. This earning must be converted either into inventory or in plant and machinery in order to grow in future. Investment in current assets, other than inventory, will allow CEOs to enjoy freedom of using this money in their own favor. Agency costs must be minimized which exists in the form of personal expenses of CEOs of corporations. This is possible only when their compensation policy is designed in a manner that it is based on firms' performance. It is also deduced from the theorem that the state of corporate governance must be improved in order to minimize the liquidity problem, exist in the form of circularity debt in the Oil & Gas Sector of Pakistan, which is really a governance issue. Resolution of this issue will lead the corporate sector to raise their liquidity and profitability.