The Role of Financial Engineering in Corporate Finance: Evidence from Mergers and Acquisitions Ventures in Pakistan

Abstract

This study examined the impact of financial engineering on corporate finance, focusing on mergers and acquisitions (M&A) in Pakistan from 2010 to 2024. Using a comprehensive dataset of 347 M&A transactions, we employed partial least squares structural equation modeling (PLS-SEM) to analyze the relationships between financial engineering techniques, deal characteristics, and post-merger performance. The results indicated that sophisticated financial engineering strategies, particularly in deal structuring and risk management, significantly improved the likelihood of successful M&A outcomes. Furthermore, the study revealed that the effective use of financial engineering tools was positively associated with enhanced shareholder value and improved financial performance of the combined entities. These findings contribute to the growing body of literature on the importance of financial engineering in emerging markets and provide valuable insights for corporate finance practitioners and policymakers in Pakistan.

Keywords: Financial Engineering, Mergers and Acquisitions, Corporate Finance, Pakistan, PLS-SEM