Monica Singhania

Volatility in Asian stock markets and global financial crisis

Purpose – Asian markets have shown immediate response to the financial crisis in the past and stock returns were affected critically. An attempt is made to study the volatility of stock returns in this paper. The authors studied the impact of global crisis on volatility of stock returns; that can help in better policy selection and implementation in the scenario of financial downturn. Looking at the increase in volume of trades between Asia and the world, Asian markets have gained prime position within global financial industry. Thus, it is essential that more researches are employed for better understanding of Asian Markets. Design/methodology/approach – Impact on volatility of stock market returns of Hong Kong, Japan, China and India during sub-prime crisis and Eurozone debt crisis has been estimated using Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model. The analysis is done using time series data of daily returns for the period 2005-2011 of the major indices of thes...

Determinants of Corporate Dividend Policy: A Tobit Model Approach

Dividend is the return that a shareholder gets from a company, out of its profits, on his shareholding. Equity investors receive returns in two forms—dividends and capital gains. The factors that drive dividend policy of a company have been topic of extensive research for a long time now with various, sometimes even conflicting, theories trying to find some pattern in the behaviour vis-à-vis dividend payouts. The objective of the article is to find the validity of the different views on determinants of dividend policy in India and empirically prove their significance using Tobit regression model. We develop framework based on major theories on corporate dividends available in literature so as to examine the determinants of dividends comprehensively. The firm-level panel data of National Stock Exchange (Nifty 50) companies from 1999–2000 to 2009–2010 is taken for this purpose. Accuracy and validity of the results is ensured using various diagnostic tests and test procedures to find the best-fit models. The findings suggest that firm’s size (market capitalization) and firm’s growth and investment opportunity are significant determinants of corporate dividend policy in India. The firm’s debt structure, profitability and experience are found to be not significant in the Indian scenario and in this way the results do negate some theories. The results of the study can be used by investors to take informed decision while deciding on investments based on dividend yield for Nifty 50 Index companies and to predict dividend yields in future using the significant determinants.

Impact of corporate characteristics on human resource disclosures

Purpose - Human resource (HR) disclosures are voluntary in nature in most countries including India. The voluntary nature of HR disclosures results in discrepancy in the HR disclosure practices across companies and industries. The purpose of this paper is to examine the extent of HR disclosures in annual reports of Indian listed companies and to identify their determinants in a three stage analysis. Design/methodology/approach - In the first stage a 16 item human resource disclosure index (HRDI) has been constructed for the set of CNX 200 companies listed on National Stock Exchange. Thereafter the effect of various independent variables on HRDI is analysed descriptively. Finally in the third stage HRDI has been regressed against the independent variables using regression analysis technique to identify key determinants of HRDI. Findings - The research reveals that there is high variation among sample companies as regard HRDI. The results of descriptive analysis, correlation analysis and multivariate regression analysis establish that government’s participation in ownership and market capitalisation has positive significant effect on HRDI at 1 per cent, presence of separate HR directors committee, presence of more independent directors on board at 5 per cent and cross-list America and profit after tax at 10 per cent level. Implicitly HRDI is positively affected by size of company as measured by market capitalisation. Though contrary to expectations, other variables leverage, number of employees, assets, ownership concentration, type of auditor, age, complexity of business structure, employee expense to total operating expense ratio, industry affiliation, foreign investment and proportion of non-executive directors on board are found to have moderate though insignificant influence on HRDI. Research limitations/implications - Cross-sectional design, dependence on annual reports as a primary document for disclosure and subjectivity in HRDI construction are the main limitations of the research. A longitudinal study may be carried to study the pattern of HR disclosures in future. Weighted ranking of different items of disclosures may be studied to improve the understanding of extent of disclosures. Practical implications - The HRDI as constructed in the research may be used as a benchmark by companies to improve their HR disclosures. It can also be used by accounting bodies and company regulators while deciding about standards regarding HR disclosures. Investors can also use HR disclosures made by a company as a basis to understand its financial standing and future potentials. Originality/value - The study adds to the existing literature by developing 16 item HRDI to measure the extent of disclosures by listed companies in India and thereafter by including some new propositions in the determinants of HRDI have never been tested in the existing studies. These propositions are government’s participation in ownership, separate HR committee of directors, board composition and foreign activity. These propositions have been empirically validated in this research except for foreign activity.

Volatility and cross correlations of stock markets in SAARC nations

Purpose – The purpose of this paper is to examine cross-correlation in stock returns of SAARC countries, conditional and unconditional volatility of stock markets and to test efficient market hypothesis (EMH). Design/methodology/approach – Stock indices of India, Bangladesh, Sri Lanka and Pakistan are considered to serve as proxy for stock markets in SAARC countries. Data consist of daily closing price of stock indices from 2000 to 2011. Since preliminary testing indicated presence of serial autocorrelation and volatility clustering, family of GARCH models is selected. Findings – Results indicate presence of serial autocorrelation in stock market returns, implying dependence of current stock prices on stock prices of previous times and leads to rejection of EMH. Significant relationship between stock market returns and unconditional volatility indicates investors’ expectation of extra risk premium for exposing their portfolios to unexpected variations in stock markets. Cross-correlation revealed level of ...

Determinants of FDI in developed and developing countries: a quantitative analysis using GMM

Purpose The purpose of this paper is to investigate the potential determinants of FDI, in developed and developing countries. Design/methodology/approach This paper investigates FDI determinants based on panel data analysis using static and dynamic modeling for 20 countries (11 developed and 9 developing), over the period 2004-2013. For static model estimations, Hausman (1978) test indicates the applicability of fixed effect/random effect, while generalized moments of methods (GMM) (dynamic model) is used to capture endogeneity and unobserved heterogeneity. Findings The outcome across different countries depicts diverse results. In developed countries, FDI seeks policy-related determinants (GDP growth, trade openness, and freedom index), and in developing country FDI showed positive association for economic determinants (gross fixed capital formulation (GFCF), trade openness, and efficiency variables). Research limitations/implications The destination of FDI is limited to 20 countries in the present paper. The indicator of the institutional environment, namely economic freedom index, used in this paper has received some criticism in calculations. Practical implications The paper enlists recommendations for future FDI policies and may assist government in providing a tactical framework for skill development, thereby increasing manufacturing growth rate. The paper also throws light on vertical and horizontal capital inflows considering resource, strategy, and market-seeking FDI. Social implications FDI may bring significant benefits by creating high-quality jobs, introducing modern production and management practices. It highlights how multinational corporations and government contribute to better working conditions in host countries. Originality/value The paper uncovers important features like macroeconomic variables, especially country-wise efficiency scores, policy variables, GFCF, and freedom index, for determining FDI inflows in 20 countries using panel data methods and provides a roadmap for developed and developing countries. The study highlights endogeneity and unobserved heteroscedasticity by applying GMM one- and two-step procedure.

Human Resource Accounting Disclosure Practices in Indian Companies

Human resources with their innate pool of knowledge, skill, leadership, creativity and talent assist companies in achieving their goals. However, the current accounting system is not able to provide the value of human resources. We find human resource accounting (HRA) disclosures to be very low in Indian companies with only five companies reporting HRA in their annual report that is just 1 per cent of the sample set of companies. Furthermore, HRA disclosures that are made by companies are unstructured and inconsistent, and incomparable across companies and industries. Therefore, we examine the extent of HRA measurement and reporting practices of selected Indian companies among the National Stock Exchange S&P CNX 500 companies. We critically analyze these and rank the companies on the basis of the extent of disclosure of HRA information in annual reports of companies.

Hero cycles: operating breakevens

Title – Hero Cycles: operating break-evens. Subject area – Bicycle industry, emerging markets, competitor analysis, financial forecasting. Study level/applicability – This case can be used as a teaching tool in the following courses: MBA/post-graduate programs in management in management accounting, management control systems and strategic cost management; executive training programs for middle and senior level employees; and under-graduate/post-graduate programs in entrepreneurship. It can be used to explain and test the concepts of SWOT analysis, Porters five forces model and PEST analysis. It introduces the technique of breakeven analysis and its relationship with operating leverage. Moreover, it demonstrates the application and analyses of the Du Pont equation. Case overview – Hero Cycles Ltd was established by the four Munjal brothers in pre-independence India. It started off as a business of bicycle spare parts, but quickly expanded in post-independence India, with Ludhiana as its base. The company...

The financial viability of the Yamuna Expressway

Subject area The case focuses on issues concerning infrastructure development by Jaypee Infratech Ltd. (JIL) in the context of emerging market of India. This is undertaken by employing the usage of strength weakness opportunity and threat analysis (SWOT) analysis, political, economical, sociological and technological analysis (PEST) analysis and Porters Five Forces Model and competitor analysis. It also outlines the importance of financing model adopted with respect to Concessionaire Agreement drafted and executed towards making an infrastructure project financially viable so as to reduce the risk associated with infrastructure projects which requires huge investments and long gestation period. Further, it also highlights the importance of how future projects can be undertaken on the basis of public private partnership (PPP) model. Study level/applicability This case can be used as a teaching tool in the following courses: MBA/Post Graduate Program in Management in Management Accounting, Management Control Systems and Strategic Cost Management. It can be used to explain concepts of SWOT analysis and Porters Five Forces Model analysis. Students are also introduced to the technique of financial analysis. Executive training programs for Middle- and Senior-level employees to explain the Infrastructure Financing and Concessionaire Agreement for infrastructure projects. Under-graduate/Post-graduate programs in Entrepreneurship. Case overview JIL was established as a Special Purpose Vehicle in 2007 to execute the Yamuna Expressway project. Originally the contract was awarded to parent company Jai Prakash Associates Ltd. in 2003. The project entails financing, construction, operation, maintenance and collection of toll for 36 years and then transferring it back to Government of Uttar Pradesh of 165.5 km Yamuna Expressway, and subsequently development of 530-million square feet of area from five parcels of land earmarked along the expressway. The project highlights how a PPP infrastructure project can be made financially viable. Expected learning outcomes SWOT analysis was used to identify the strengths, weaknesses, opportunities and threats to a company. Also, application of Porters Five Forces Model was done to analyze an industry. Determining quantitative terms like Long-Term Return on equity, Return on Capital Employed, Book Value vs Market value, Net Margins, Income Tax benefits enjoyed under section 80-IA and Minimum Alternative Tax (MAT); determining financial viability of an infrastructure project over its entire life cycle. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes

Financial turnaround of Indian Railways (A)

Title – Financial turnaround of Indian Railways (A).Subject area – Financial management, strategic management.Study level/applicability – The study can be used by business schools, companies/organizations, individuals, students of business management, in the area of financial and strategic management to study and analyse management strategies by a Government organization that has to balance social objectives and commercial viability.Case overview – Indian Railways (IR) is one of the worlds largest employers and there was a significant improvement in its financial performance during the period 2004‐2008 without any reductions in its workforce. The main reasons for the poor performance of IR prior to this period were attributed to severe competition from other modes of transport, rigid pricing, investment in un‐remunerative projects and other such practices. Various recommendations, including restructuring/corporatizing, reorganization, increasing passenger fares, unbundling of non‐core activities, downsiz...

Determinants of FPI in Developed and Developing Countries

The pattern of capital inflows in developed and developing economies are different because of dissimilar economic and political structures. From the point of view of host country, especially the developing countries, portfolio flows are considered to play a pivotal role in bridging the saving investment gap and providing foreign exchange to finance current account deficit. While the investors of developed country invest in portfolios of different countries to diversify the risk and earn more returns, foreign portfolio investors generally go for short-term investment to reap the benefits of good economic conditions and they tend to withdraw their investments during the period of recession. This article identifies the determinants of foreign portfolio investment (FPI) in developed and developing economies. Though the movement of capital among different countries is researched in depth by existing literature, the present study adds to literature by identifying the institutional factor involving freedom index. The institutional factors aid in identifying the determinants of FPI among select developed and developing countries. This study seeks to answer, where the funds of foreign portfolio investors are headed. And also the reasons of attractiveness for FPI among different sets of countries. The sample of the study is limited to a set of 19 developed and developing counties for the period of 10 years (2004–2013). We study the determinants of FPI for a group of developed and developing countries using fixed and random effects. Additionally, we use panel generalized method of moments (GMM) suggested by Arellano and Bond (1991, The Review of Economic Studies, 58(2), 277–297). This methodology is suitable to remove the problem of endogeneity which static model is not able to capture. The results of model also incorporates persistence effect considering lagged value of dependent variable. The study empirically tests the various factors that determine the inflows of FPI and analyses their performance during different stages of the economic cycle in the last 10 years. Implicitly, in case of developed countries, it was observed that interest rate differential, trade openness, host country stock market performance and US stock market returns are significant trendsetter, while in developing countries, freedom index, interest rate differential, host country stock market performance, trade openness, US stock market returns and crisis period (2006–2008) significantly influence the inflow of FPIs. Dynamic model supports that as a group of 19 countries, portfolio investments are significantly influenced by interest rate differentials, freedom index, US stock market and host country stock market returns.