Geeta Duppati

Cross-border mergers and acquisitions: Mature markets vs. emerging markets—with special reference to the USA and India

Abstract Due to the differences in the merger waves across markets, the market for cross-border mergers and acquisitions by Indian companies differs in context and situations from those of the mature markets. Post-acquisition performance is critical to the success of companies involved in overseas investments. This paper uses event study methodology to analyse the long-term performance of Indian-acquiring companies by undertaking 30 outward foreign direct investment (OFDI)-related deals, during 2000–2008 period. Further, it compares the empirical findings from India with the prior findings from the USA. It is evident from the empirical results that the stock markets reacted positively in the short run following the announcements of the OFDI-related mergers and acquisitions by Indian companies. The empirical findings also showed positive results in the post-acquisition period following the overseas deals.

The Risk Adjusted Return on Indian Central Public Sector Enterprises

This paper presents an empirical examination of financial performance and governance of 84 Indian Central Public Sector Enterprises (CPSEs). Currently, most CPSEs are 100% owned by Government of India; however, there are a few which are listed on the Stock Exchange. The shareholding for the listed CPSEs includes both public holders and other CPSEs which acquire significant blocks. The Government of India (GOI) has signalled an intention not to reduce its own holding below 51% and this is well below the average holding which is currently above 80%. As the GOI pursues an active campaign to raise funds through further sales of shareholdings this study is timely in considering the returns achieved and whether the governance structures put in place have impacted on the returns of CPSEs.

Long memory volatility in Asian stock markets

Purpose n n n n nThe purpose of this paper is to assess to what extent intraday data can explain and predict long-term memory. n n n n nDesign/methodology/approach n n n n nThis article analysed the presence of long-memory volatility in five Asian equity indices, namely, SENSEX, CNIA, NIKKEI225, KO11 and FTSTI, using five-min intraday return series from 05 January 2015 to 06 August 2015 using two approaches, i.e. conditional volatility and realized volatility, for forecasting long-term memory. It employs conditional-generalized autoregressive conditional heteroscedasticity (GARCH), i.e. autoregressive fractionally integrated moving average (ARFIMA)-FIGARCH model and ARFIMA-asymmetric power autoregressive conditional heteroscedasticity (APARCH) models, and unconditional volatility realized volatility using autoregressive integrated moving average (ARIMA) and ARFIMA in-sample forecasting models to estimate the persistence of the long-term memory. n n n n nFindings n n n n nGiven the GARCH framework, the ARFIMA-APARCH long-memory model gave the better forecast results signifying the importance of accounting for asymmetric information when modelling volatility in a financial market. Using the unconditional realized volatility results from the Singapore and Indian markets, the ARIMA model outperforms the ARFIMA model in terms of forecast performance and provides reasonable forecasts. n n n n nPractical implications n n n n nThe issue of long memory has important implications for the theory and practice of finance. It is well-known that accurate volatility forecasts are important in a variety of settings including option and other derivatives pricing, portfolio and risk management. n n n n nSocial implications n n n n nIt could be said that using long-memory augmented models would give better results to investors so that they could analyse the market trends in returns and volatility in a more accurate manner and reach at an informed decision. This is useful to minimize the risks. n n n n nOriginality/value n n n n nThis research enhances the literature by estimating the influence of intraday variables on daily volatility. This is one of very few studies that uses conditional GARCH framework models and unconditional realized volatility estimates for forecasting long-term memory. The authors find that the methods complement each other.

Are the Indian corporates creating value through acquisitions in the US and European markets

This paper examines the stock market reactions to a sample of merger and acquisition (M&A) cases following the liberalisation of the policy regime by the Indian Government between 2000 and 2011. The stock market reacted differently to the announcements of overseas foreign direct investment related to M&As by Indian corporates. In some cases, the stock market reacted negatively in the short-term to the announcement but favourably in the post-acquisition period. In other cases, there was a favourable reaction or an unfavourable reaction in the short-term after the announcement and the longer term of the post-acquisition period. Drawing on secondary information, this paper offers explanations for the stock market reactions. Context is important and the specific characteristics of the Indian companies may have affected the outcomes. Though each case is unique, there are trends in approaches that are discernible. This paper also investigates the relationship between media coverage of company events such as announcements of mergers and acquisitions and the market reaction to such announcements. The results indicate that a variety of factors are responsible for overseas investment.

Corporate governance, research and development volatility and firm performance - Evidence from Spain and Ireland

Abstract The present study sheds light on the comparative experiences of the two countries originating from differing legal systems and describes how their codes and practices affect the publicly listed firms’ performance. It investigates the linkages between Research and Development (R&D) expenditures, Board characteristics and firm performance using a sample of Irish and Spanish firms for the period 2005–2014. To do this, the study uses ROA and Tobin’s Q as proxies for financial performance; and board size, non-executive directors, female representation and CEO duality as board structure characteristics; and R&D expenditure volatility, employing different techniques that include OLS, fixed effects model and Quantile regression model. The difference-in-difference model is used to verify the significance of robustness of relationships considering the global financial crisis as an exogenous shock. The descriptive statistics suggests a comparability of boards’ independence for the Spanish- and Irish-listed firms. Although the Spanish firms are less dual than Irish firms, the results are comparable on the association between CEO duality and firm performance. The findings of Spanish-listed firms on the relationship between increase and decrease in the R&D expenditures volatility and performance support the creative–destructive perspective that suggests effective governance in funding allocation to R&D.

The dynamics of price discovery for cross-listed stocks evidence from US and Chinese markets

Abstract Purpose: This study examines how, and to what extent the trading of the cross-listed China-backed ADRs on the New York Stock Exchange (NYSE) contributes to the information flow and price discovery for the corresponding cross-listed stocks on the Shanghai Stock exchange (SSE). Design/methodology/approach: The study utilizes the information share, Granger causality test, Vector error correction model, Permanent–Temporary Gonzalo–Granger (PT/GG) method and Bivariate DCC-EGARCH model to examine the price discovery dynamics across the cross-listed stocks. Findings: The Granger causality tests show that there is two-way transmission on feedback between the Chinese and US markets. The effects from NYSE to SSE are larger than the other way round. The Bivariate DCC-EGARCH model test results indicate the volatility spill over from NYSE is larger from the SSE. Practical implications: Results suggest that in contrast to previous studies that showed very little contribution to price discovery by Chinese ADRs on the NYSE, the present study indicates that the contribution to price-discovery of Chinese ADRs on NYSE has increased relative to the past, suggesting the importance of changing time frames and economic situations. Originality/value: The study differentiates between long-term and short-term price discovery effects and finds that home country bias persists in the long term and in the short term the information from the Cross-listed China-backed ADRs on the New York Stock Exchange (NYSE) affects price discovery for SSE stocks.

Estimating Long Memory Volatility Using High-Frequency Data of Asian Stock Markets

This article analyzed the presence of long memory in volatility in 5 Asian equity indices namely SENSEX, CNIA, NIKKEI225, KO11 and FTSTI, using 5 minutes intraday return series ranging from 05-jan-2015 to 06-Aug-2015. The study employed ARFIMA-FIGARCH model and ARFIMA-APARCH model and compared them with GARCH (1,1) model and APARACH(1,1) in terms of in-sample forecast accuracy. The results confirmed the presence of long memory in both the return and volatility series for all the five markets under study. Among the group, CNIA and STI showed most persistence in both the return and conditional volatility. In terms of forecast measures, the long-memory GARCH models were found to be performing better compared to the short-memory GARCH models.

Financial Performance in Indian State-Owned Enterprises Following Corporate Governance Reforms

Practitioner/policy implicationsnThe most striking observation from the study is that changes that were introduced as a corporate governance reform, such greater professionalism in boards, did not gain traction and enhance performance, rather the process of director selection and the concentrated bureaucratic and political interference stymied what was asserted to be conceptually sound reforms.