Market Competition, Industrial Policy and Corporate Risk-Taking: Evidence from Pakistani Enterprises

Tauseeq Muhammad Sabar (æ ¨å­ ) and Nawaz Rao Sabir (勇敢) ()

International Journal of Politics & Social Sciences Review (IJPSSR), 2026, vol. 5, issue I, 1-8

Abstract: This study evaluates the impact of industrial policy and market competition on corporate risk-taking using data from Pakistani firms. This study reveals that industrial policy (IP), measured by IP-hat, consistently reduces corporate risk-taking across multiple model specifications. The relationship between market competition (HHI) and risk-taking shows methodological sensitivity, while Pooled OLS estimates indicate significant negative effects from both high and low competition levels, these effects become statistically insignificant in fixed effects models that control for firm-level heterogeneity. This suggests that observed competition effects may stem from time-invariant firm characteristics rather than dynamic market changes. Furthermore, we find no significant interaction between industrial policy and market competition, indicating that policy effects operate independently of market structure. These results highlight the risk-suppressing nature of IP in emerging economies and underscore the importance of methodological considerations in competition studies. The findings carry important implications for policymakers designing industrial policies that balance firm support with innovation incentives in developing markets.

Date: 2026
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