Anand Jha

Earnings Management Around Debt-Covenant Violations: An Empirical Investigation Using a Large Sample of Quarterly Data

I find that managers manage earnings upward in the quarters preceding a debt-covenant violation, but downward in the quarter a violation occurs. And they continue to manage earnings downward while the firm remains in violation. Because this scenario can play out within a year, the use of yearly data to examine the debt-covenant hypothesis can be problematic. Further analysis shows that the earnings management around the debt-covenant violation is also done to improve the manager’s bargaining power in the renegotiation that follows the violation. Furthermore, I find no evidence of excessive earnings management by high-debt firms to stave off a violation, but I do find evidence that the Sarbanes–Oxley Act restrains managers from using accruals to stave off a violation. These results are based on examining 193,803 firm-quarters, 8,804 firms, and 2,035 new covenant violations spanning 1996 to 2007.

Inequality and elections : the nationwide origins and state-level dynamics of India's Maoist insurgency

Abstract This article investigates the causes of Indias Maoist insurgency and its changing dynamics. To explain its origins, we empirically test three hypotheses using cross-state-level data: inequality of wealth in states; inefficient state government; and, disgruntled provocateurs. Our analysis reveals that insurgency is caused by inequality of wealth in states, not inefficient state governments and disgruntled provocateurs. Subsequently, we study variations in the number of Maoist attacks and the selected targets in the eastern Indian state of West Bengal using newspaper reports of events. Our analysis demonstrates that the numbers of incidents and the type of targets selected depend on electoral competition between regional political parties and their interactions with Maoists. The findings, therefore, indicate that whereas inequality of wealth can explain the insurgencys presence in states, political competition within states could explain its dynamics.

Access to bank loans while in bankruptcy: the role of single vs. multiple banking relations

Purpose - – The purpose of this paper is to use a unique hand-collected data set from India to investigate whether firms with multiple banking relationships that are in bankruptcy get additional loans more easily than those with a single banking relationship. The authors find that firms that have a single banking relationship increase their bank borrowing by 5 percent every year compared to those with multiple banking relationships. The results are in contrast to the hypothesis that firms choose to have multiple banking relationships to increase the probability of getting additional loans in cases of financial distress. The results are consistent with the hypothesis that a larger number of banks increases the coordination and bargaining costs during bankruptcy and decreases the liquidation value of the assets, and that the banks take that into consideration before making loans. Design/methodology/approach - – Regression and control. Findings - – The choice of single vs multiple banking relationships is a widely studied topic in the banking literature. A large strand of theoretical and empirical literature argues that multiple banking relationships make it easier for a firm to get additional loans in case of financial distress. The study shows that such may not be the case in instances where bargaining and co-ordination costs due to poor bankruptcy procedures are severe. Originality/value - – The authors use a unique hand collected data set from India to investigate if it is easier to get additional loans in bankruptcy for firms with multiple banking relationships compared to those with a single banking relationship.