New Delhi, Nov 26 (NationPress) A recent report highlights that the ongoing trend of significant companies delisting from the Pakistan Stock Exchange is undermining price discovery and competitive dynamics in the nation.

Following the elimination of tax benefits for listed stocks, high tax rates may compel more large corporations to contemplate exiting the stock market, as reported by The Star.

In the 1980s, Pakistan incentivized firms with a five percent tax break for listing on the stock exchange, attracting numerous family-owned textile mills and other businesses to the Pakistan Stock Exchange (PSX), according to Ali Farid Khwaja, CEO of Oxford Frontier Capital and Co-founder and Chairman of KTrade.

“Once the tax incentives were removed, many companies lost interest in public investors. They discreetly repurchased shares, reduced the free float, and continued functioning like private family enterprises,” he stated.

In Pakistan, the majority of listed companies are closely held, with sponsors possessing 90-95 percent of shares, contrasting with global markets where 10-20 percent ownership is often adequate.

The recent decision by Shield Corporation to delist from PSX mirrors moves by companies like Gillette and Philip Morris, emphasizing this growing trend.

Some firms choose to delist due to minimal public ownership. For instance, Philip Morris delisted when its free float dwindled to five percent, rendering the listing virtually meaningless while still attracting regulatory oversight.

Being publicly listed constrains operations in the “grey areas” prevalent in Pakistan’s largely undocumented economy, making competition more challenging when non-listed competitors face fewer restrictions, the report noted.

Multinational corporations frequently opt to declare profits in jurisdictions with lower taxes, a process complicated by being listed as shareholders scrutinize intercompany transactions, import pricing, margins, and royalties.

Additionally, the International Monetary Fund (IMF) released a new 186-page report reiterating a troubling reality: Pakistan’s economic challenges stem primarily from internal weaknesses rather than external pressures.

The report identifies corruption, weak institutions, and powerful vested interests as factors pushing the country toward economic collapse, as reported by Pakistan Observer.