Arunima Haldar

Empirical Study on Ownership Structure and Firm Performance

Researchers have come up with varied assertions with regard to the relationship between ownership structure and firm performance. Studies show positive, negative as well as both positive and negative relationship at differing levels of equity holdings by managers. Majority findings argued about owner controlled firms performance being better than manager controlled ones, yet lacking statistical assertion for the same. This research work is empirically investigating the efficiency of ownership groups in enhancing corporate performance by analyzing firms traded on Bombay Stock Exchange (BSE). We are using BSE – 500 index firms to create an unbalanced annual panel data from 2001 to 2008. By using fixed and random effect techniques of panel data analysis, we wish to contribute towards the enduring debate of corporate governance as to which ownership group maximizes firm performance. This debate has so far, largely remained inconclusive with different researchers advocating varied view points.

Corporate performance: does board independence matter?-Indian evidence

Purpose The purpose of this paper is to examine the effect of the presence of independent board directors on financial performance in India. Design/methodology/approach This study used panel regression models on large listed Indian firms to investigate the impact on financial performance owing to the presence of independent directors. Findings The findings suggest that independent board directors in Indian contexts do not significantly affect financial performance. Practical implications This study has implications for the formulation of regulation related to appointment of independent directors and the extent of their representation on the board for them to be effective. Social implications The proportion of independent directors on the board of the firm is influenced by the trade-off between the cost of having independent directors on the board versus the benefits to the firm and society. Originality/value The impact of the presence of an independent director on financial performance in highly concentrated ownership remains ambiguous.

Do compositions of board and audit committee improve financial disclosures

Purpose This paper aims to examine the impact of corporate governance practices on the level of financial disclosures made by the Indian firms. This assumes importance in the context of the role of financial disclosures in addressing the agency problem. Design/methodology/approach Financial disclosure score is computed by considering disclosures provided by the generally accepted accounting principles and is the dependent variable. The independent variable – corporate governance score – is an index comprising internal governance mechanisms. The authors empirically examine the impact of corporate governance practices on financial disclosure using multiple regression model for 200 large listed Indian firms. Findings The study suggests that quality of governance practices significantly improves financial disclosure practices of the firm. Particularly, the composition of the audit committee is effective in improving disclosures. Practical implications The finding has implications for policy makers and practitioners. It will help investors, lenders, and other stakeholders to assess firms’ financial disclosure quality. In addition, the findings, suggest the influence of governance practices on disclosure, might help in the formulation of appropriate policies about board structure and audit function. It is also a call to investors to emphasize on governance quality of the investing firms. Originality/value The study builds a case for an urgent intervention for improving the existing governance standards to advance the quality of financial disclosure in an emerging market context.

Relationship between Operational Risk Management, Size, and Ownership of Indian Banks

Purpose The purpose of this paper is to analyse the relationship between operational risk management (ORM), size, and ownership of Indian banks. This is important in the context of financial crisis experienced by developed countries due to lax regulation. Design/methodology/approach ORM practices of Indian banks are proxied by excess capital (over the required minimum capital for operational risk). Size of a bank is measured as deposits plus advances. Our sample includes 61 Indian banks during the period from 2010 to 2013. The authors empirically examine the impact of bank size on excess capital using panel data regression model. Findings The results suggest that size of Indian banks is inversely related to excess capital held by them for managing operational risk. The inverse relationship implies that smaller banks hold higher excess capital over the required minimum as per Basel norms. There is no significant relationship between ownership (public, private and foreign) and excess capital held by banks for managing operational risk. Practical implications The study has implications for Indian banks given the high level of losses due to bad loans, and the implementation of Basel III norms by the central bank, i.e. Reserve Bank of India. Social implications The study has implications for Indian financial system as a large percentage (about 33 per cent) of household savings are deployed in deposits with commercial banks and other financial institutions. The bank failure(s) can have disastrous consequences for the Indian economy as the capacity of the Indian financial system to withstand such shocks is highly doubtful. Originality/value There is very little evidence on ORM practices of Indian banks, and its relationship with size and ownership. The study assumes significance in the context of significant changes in the institutional and regulatory framework.

Cross-border Acquisitions and Host Country Determinants: Evidence from Indian Pharmaceutical Companies

This study seeks to examine the locational determinants of outward foreign direct investment (OFDI) of Indian pharmaceutical companies (IPCs); best known for their technological leapfrogging and widely acclaimed as one of the most successful representations of emerging market multinationals. Research on the specific ownership advantages of Indian multi-national enterprises (MNEs) and their internationalization strategies is catching up and there still exists a knowledge gap concerning the choice of investment destination and motivations behind their acquisitions. This study tries to address this gap by attempting to build a locational choice model which best explains the spatial distribution of Indian pharmaceutical acquisitions. Based on theoretical insights, 13 important variables measuring the host country characteristics such as economic, political, institutional and cultural environment of 33 countries for the period 2000–2012 have been considered. Panel regression has been employed to empirically analyze the host country-specific determinants. Our results highlight the importance of strategic assets of the host countries as the key determinants for the Indian pharmaceutical firms who appear to be targeting the developed countries through the inorganic route to overcome their inadequate product development capabilities. The presence of a conducive economic environment, a common language and openness of the host countries also seem to impact the choice of location. Interestingly, geographical distance, group affiliations and institutional variable corruption had no impact on the locational choice of the host country. The findings of the study may be extended to other studies on the internationalization strategies of firms arising from other emerging economies.

Economic Value Added: Relevance and Implications for Indian Corporates

This study examines the outperformance of Economic Value Added (EVA) on traditional performance measures in explaining the contemporaneous Market Value Added (MVA).We also aim to test the best predictor of MVA of Indian companies among the value based measure and traditional performance measure. The study estimated the model using panel data regression for eleven annual observations from 2003-13 for 448 large listed Indian companies.We found that there exists a significant positive relationship between EVA and MVA. EVA also provides additional information to investors and can be adapted by corporates as a philosophy for encouraging and educating employees. Thus managers can utilize the information provided by EVA to distinguish among value creating and value destructing activities.