Samir K. Barua

Financial Literacy among Working Young in Urban India

The paper reports investigation of a study on the influence of various socio-demographic factors on different dimensions of financial literacy among the working young in urban India. While the influence of several factors such as gender, education and income is similar to what has been reported in other contexts, a few factors specific to India, such as joint-family and consultative decision making process are found to significantly influence financial literacy. The study also investigates the relationship between the dimensions of financial literacy. Adding to the growing empirical understanding of financial literacy across countries, the study provides an analytical basis for enunciating policy for enhancing financial literacy of youth in India.

Research on the Indian Capital Market: A Review

The Indian capital market has been attracting considerable attention in recent years especially after the opening up of the Indian economy. As a result, several researchers have addressed various issues pertaining to the capital market in India. What has been the trend of research in this field over the last 15 years? This article by Barua, Raghunathan, and Varma examines this issue and provides a comprehensive review on the nature of research in the field of capital market in India. In the process, it also identifies research gaps and research issues that need attention from researchers.

Securities Scam Genesis, Mechanics and Impact

The term “securities scam” refers to the diversion of funds from the banking system to various stockbrokers in a series Of transactions—primarily government securities—during the period April 1991 to May 1992. An understanding of the scam is a prerequisite for any meaningful analysis of policy alternatives to improve the functioning of the financial system. This paper by Samir K Barua and Jayanth R Varma presents a plausible reconstruction of how the scam originated, how it was perpetrated, and what would be its aftermath.

Investigation of decision criteria for investment in risky assets

This paper examines the empirical validity of stochastic dominance rules and the mean-variance framework by analysing data generated through an experiment on individual investment decisions under uncertainty. The analyses indicated that none of the two approaches provided adequate explanation for the observed pattern of choice. An alternate framework, based on preference for skewness in addition to mean and variance, was examined. This framework provided a significantly better explanation compared to the two parameter framework. The preference for skewness was significant at higher levels of borrowing and at all levels of wealth.

Analysis of the Indian Securities Industry: Market for Debt

In the current liberalized environment, the Indian debt market appears to be all set to take off. With the commencement of trading of debt instruments by the National Stock Exchange this year, the secondary market of the Indian debt market is expected to achieve a significant level of activity. In this context, a closer understanding of the Indian debt market in terms of the private corporate sector, public sector, government sector, and the housing finance sector assumes increased importance. In this paper, the authors provide the much needed perspective on the Indian debt market as a whole and make recommendations for its development wherever necessary.

Global Economic Meltdown: Greenspans Legacy

In the event of statedly the deepest global crisis ever since the Great Depression, with the world economy mired in a severe economic meltdown, Samir K Barua and Mahendra R Gujarathi identify the factors and the players that incubated and nurtured the meltdown. The policies of deregulation, monetary expansion, and fair value accounting are specifically addressed in a historical perspective. The authors offer an insight into how sequentially the lawmakers first created the potent environment for risk-taking through unrestrained deregulation, the Federal Reserve then set the stage for the crisis with a policy of unbridled monetary expansion, and the accounting standardsetter finally relaxed norms to provide support for hiding the losses incurred� thus together fuelling the crisis. Although several trillions of dollars have been pumped into the market to maintain the credit flow, it is yet uncertain as to how the crisis will impact in the long run, the authors conclude on a cautionary note.

RBI Autonomy and the Indian Financial Sector

In the context of the worldwide trend towards greater independence for the central banks and the recent public pronouncements by the Governor of the Reserve Bank of India (RBI), there is now a strong possibility of the RBI being given more autonomy. This is likely to be accompanied by several changes in the operations of the RBI including a pruning of its peripheral functions. This paper by Samir K Barua and Jayanth R Varma argues that these changes would have momentous implications for the financial system as a whole. Portfolio managers would have to contend with a wider choice of securities, more frequent portfolio rebalancing and use of risk hedging mechanisms. Corporate finance managers would face increased complexities in decisions like financing mix, cash management, designing financial instruments, capital budgeting and management of exchange risk.

Ownership Contingent Influence of Governance Structure on CEO Compensation: Need for Change in Governance Paradigm

The study examines the need for changes in the standard governance structure through investigation of the moderating effect of ownership identity and ownership concentration on the influence of standard governance structure on CEO compensation in companies with dominant owners in control. Using data from companies listed on the National Stock Exchange (NSE) of India that were a part of the diversified 100 stock index for the period 2007-2012, we find that the influence of standard governance structure on CEO compensation is indeed contingent on identity of the owner and concentration of ownership. Duality is the only governance measure that directly influences CEO compensation in family owned domestic private companies. Gender diversity and proportion of non-executive independent directors directly influence CEO compensation in corporate owned foreign private companies. The direction of influence of non-executive independent directors however supports the possibility of board capture by CEOs. In case of government companies, none of the governance measures directly influences CEO compensation. The key finding of the study are the meagre and in one instance an inappropriate (from governance point of view) influence of standard governance measures. As the decision on CEO compensation in case of companies with dominant owners in de facto control of board and executive management implies ‘principal-principal’ rather than ‘principal-agent’ conflict of interest, the results from the study suggest a re-think on the standard governance framework that is designed to deal with the latter conflict. A 2013 legislative initiative disenfranchising interested shareholders from voting on related party transactions including CEO compensation is a step in the right direction but much else remains to be done. Corporate governance frameworks across the world are derived from the frameworks proposed in the US and UK context of dispersed ownership. The framework is designed to deal essentially with ‘principal-agent’ conflict of interest. This ‘one size fits all’ approach may not ensure governance effectiveness in several situations that arise in functioning of organizations that require dealing with ‘principal-principal’ conflict. Our study on CEO compensation in the Indian context underlines the need for governance based on minority-shareholder-centered governance framework.

Effectiveness of minimum tax legislation and its effect on corporate financial reporting: A comparative analysis between the United States and India

Abstract This paper reports a comparative analysis of the experience of introducing minimum tax legislation in the US and India. Given the differences in the economic and market settings in the two countries, one would expect the impact of the regulation and the corporate response to its introduction to be different. Our empirical analysis, however, indicates that the response to the minimum tax legislation in India is very similar to that in the US. The evidence indicates that the minimum tax legislation is not the best means of achieving horizontal equity among taxpayers, given its significant administrative and compliance costs and the manipulative reporting response it generates from the corporate sector.