Geeta Lakshmi

An Exploratory Study on Cognitive Skills and Topics Focused in Learning Objectives of Finance Modules: A UK Perspective

Finance is an important subject in many undergraduate programmes. In the UK, the technical competencies in this area are covered by the QAA benchmark in finance (2007). However, the benchmark does not rigidly circumscribe the curriculum and expected competencies. As a result, universities are free to teach the subject from a variety of perspectives. In this paper, the subject-specific knowledge and skills emphasised in core finance subjects in accounting undergraduate programmes in the UK are explored. Learning outcomes from module handbooks/unit specifications from 10 UK universities are used to analyse the taught topic areas and the cognitive skills that are developed and tested. The results indicate that the topic areas of funding/sources of finance feature highly in the finance curriculum. However, while cognitive skills should stress the demands of the rapidly changing business environment, this was undetected, and a number of topics and related cognitive skills were found to be under-developed in the programmes reviewed. The study examines an under-researched area and offers some insights into what is considered important in the finance curriculum in the UK.

The Determinants of Sovereign Eurobond Spreads: India 1990-1992

In this paper we look at the determinants of Indian eurobond prices over the period 1990-1992. We measure the general market effect of changes in the risk-free term structure and test for the effect of idiosyncratic factors such as ratings, listing exchange, issuer type, lead manager, number of dealers and influential dealer. We find that the most important single factor influencing the change in observed prices of Indian eurobonds over the period was the change in the risk-free term structure. Ratings migrations also seem to play a role. None of the other factors has any significant effect on prices. Our results are also robust in that the significant variables maintain their magnitude and significance through all the tests.

War and Emerging Market Default Risk: The Case of India and the Iraqi Invasion of Kuwait

We use the performance of Indian Eurobonds over the period 1990-1992 to examine the sensitivity of India’s creditworthiness to the Iraqi invasion of Kuwait on August 2, 1990. We also explore the related question of whether the changes in creditworthiness, measured as the effect of changes in default probabilities on bond prices, were accurately assessed by the market in a timely manner. We find that the markets systematically mis-estimated these effects. They anticipated no effects on India’s default probabilities in the invasion quarter. All the change in Indian bond prices in the quarter that the invasion took place was due to changes in the risk free term structure of interest rates. In the quarter following the invasion, effects of changes in default probabilities were significant and caused a fall of nearly 3 points in Indian Eurobond prices. In the quarter when the Gulf War took place changes in default probabilities caused a further fall of 1.34 points in Indian bond prices. We find evidence of market over-reaction to country specific invasion effects. JEL: O530, O160, G150, P330, F340

International lenders and country risk assessment

A business proposals, including those by way of investment, capital budgeting, borrowing, lending and trading, carry with them an element of risk, irrespective of whether they are in the nature of domestic ones or deal with the foreign sector. Risk, which may be differentiated from uncertainty, is the probability assigned to variability in future, of actual results from the outcome, initially visualized at the stage of project formulation. The extent of such risk, other things remaining the same, is usually greater in the case of foreign transactions than in the case of domestic ones for the simple reason that in the case of the former apart from the usual business risks inherent in any given project, there are other kinds of risks, basically emanating from variability in the foreign, economic, social and political environment and from fluctuations in exchange rates.