Santi Gopal Maji

Regulatory capital and risk of Indian banks: a simultaneous equation approach

Purpose - – This paper aims to examine the association between regulatory capital and risk of Indian commercial banks and the impacts of other relevant variables on them. Design/methodology/approach - – The study is based on a secondary data set on Indian commercial banks collected from “Capitaline Plus” corporate database and annual reports of the respective banks. Total 41 major Indian banks (21 public and 20 private sector banks) are considered in this study. Here absolute values of capital and risk are used as dependent variables along with some relevant bank specific explanatory variables in a system of a two-equation model. Based on the nature of interrelationship and identifiability of the equations, three-stage least squares (3SLS) technique is used to estimate the relationship. Findings - – Risk and capital of Indian commercial banks are inversely associated. The influence of profitability on both capital and risk is significantly positive. Moreover, human capital efficiency is negatively associated with the undertaking of risk by the banks. In this respect, Indian private sector banks are found to be more efficient in utilizing human capital for reducing credit risk. Originality/value - – It is the first comparative study in India examining the relationship between capital and risk of Indian public and private sector commercial banks covering both Basel I and II periods. Further, the role of human resource in managing risk is considered as a relevant variable in this study.

Empirical Validity of Value Added Intellectual Coefficient Model in Indian Knowledge-based Sector

The purpose of this study is to investigate empirically the validity of the basic propositions of value added intellectual coefficient (VAIC) and extend VAIC models in Indian knowledge-based sector. Using panel data relating to 62 firms from two Indian knowledge-based sectors, namely, electronics and banking sectors, for a period of 10 years (from 2001–2002 to 2010–2011), the study indicates that the VAIC model cannot be rejected as a technique of measuring intellectual capital. The result shows that VAIC significantly and positively influences the corporate performance measured by return on assets (ROA) and market-to-book (M/B) ratio. All the components of VAIC except structural capital (SC) efficiency (SCE) significantly and positively influence the corporate performance. The insignificant association between SCE and firm performance, as observed in the present context and also observed earlier by many researchers, may be regarded as the inappropriateness of the model in capturing structural capital. In order to modify the SC component of the model, the components of extended VAIC model may be used as a value-creating entity.

Corporate sustainability reporting practices in India: myth or reality?

Purpose - The purpose of this paper is to look into the sustainability practices of Indian firms in terms of the quality of disclosure, the impact of corporate sustainability performance (CSP) on firm performance and the appropriateness of the sustainability reporting guidelines followed by the firms. Design/methodology/approach - The present study is based on secondary data collected from annual reports and corporate sustainability reports of 28 listed Indian non-financial firms from 2008-2009 to 2013-2014. Content analysis is used to calculate the score in terms of level (binary coding system) and quality of disclosure (four-point scale). These scores are further used to examine the impact of CSP on firm performance by using an appropriate regression model. Findings - The study finds that the average level of disclosure is 88 per cent, whereas the quality of disclosure is nearly 80 per cent. The influence of CSP (in terms of level and quality disclosure) on firm performance is positive and significant. Moreover, the study also reveals that the Global Reporting Initiatives framework is not sufficient enough to publish the sustainability report of any business concern. The outcomes of the study, thus, indicate that sustainability practices of Indian firms are not myth but approaching toward reality. Originality/value - It is the first comprehensive study in India to analyze the corporate sustainability reporting practices encompassing different dimensions of sustainability.

Intellectual capital and firm performance in emerging economies: the case of India

Purpose The purpose of this paper is to examine the impact of intellectual capital (IC) on Indian traditional sector and compare the relative importance of IC on corporate performance of Indian knowledge-based sector (engineering sector) and traditional sector (steel sector). Design/methodology/approach Secondary data on 100 listed Indian firms, comprising of 44 firms from the engineering sector and 56 from the steel sector, are collected from “Capitaline Plus” Corporate database for a period of 14 years from 1999-2000 to 2012-2013. IC and its components are computed using Pulic’s value-added intellectual coefficient model and firm performance is measured by return on asset. Fixed effect regression model is used to investigate the hypothetical relationship between IC and firm performance. Further, quantile regression is used to check the robustness of the results. Findings The results indicate that IC efficiency and physical capital efficiency are positively and significantly associated with the firm performance for both the sectors. Regarding the components of IC, the coefficient of human capital efficiency is positive and significant, but the present effort fails to disentangle any significant influence of structural capital efficiency on firm performance. However, the results indicate that the influence of IC efficiency on firm performance is significantly greater in case of knowledge-based sector than that of traditional sector. Practical implications The findings of the study are useful for the decision makers, as the results indicate that the IC plays crucial role in value creation not only for knowledge-based firms but also for the firms belonging to the traditional manufacturing sector. Originality/value In the Indian context, this is the first study to examine the relative importance of IC in a knowledge-based sector and a traditional sector using appropriate methodology.

Intellectual capital and firm performance in India: a comparative study between original and modified value added intellectual coefficient model

With the dawn of a knowledge economy, the role of intellectual capital in value creation and sustainable competitive advantage became evident. With increasing importance of intellectual capital, the emphasis on its management and measurement increased manifolds. The Pulics value added intellectual coefficient (VAIC) model is one such method that has been widely used for measuring intellectual capital and examining the link between IC and firm performance. However, this model has been criticised because of its inefficiency to capture the structural capital of a firm. The present study is a modest attempt to modify Pulics VAIC model with the primary intention of dealing with the structural capital measurement deficiency. Employing panel data and quantile regression on Indian firms for a period of 15 years from 2000-2001 to 2013-2014, the study finds that both original VAIC model and the modified model advocate in favour of the positive influence of IC and its components on firm performance. With respect to structural capital, the study reveals that the modified VAIC model to some extend captures the structural capital efficiency of a firm more efficiently than the original model.

Corporate Sustainability Performance and Financial Performance: Empirical Evidence from Japan and India

Purpose The purpose of this article is to explore the disclosure of corporate sustainability (CS) practices and to examine the association between sustainability performance and financial performance in Asian context considering firms from India and Japan. Design/methodology/approach The present study is based on secondary data collected from annual reports and CS reports of 28 and 35 listed non-financial firms from India and Japan from 2009 to 2014. Content analysis (binary coding system) is employed to calculate the sustainability disclosure score based on Global Reporting Initiatives (GRI) framework. Market-to-book ratio is used to measure the financial performance. These scores are further used to examine the impact of CS performance on financial performance employing both the panel data model and logit regression model. Findings The study finds that the average level of disclosure is more in case of Japanese firm as compared to Indian firms. Using both the regression model, the study finds the influence of CS performance on financial performance is positive and significant for both the nations. However, the influence of CS performance is more in case of Japan than that of India. Moreover, the study also reveals that environmental factor is more dominating in influencing the financial performance in Japan. Whereas, in India, it is the social factor that dominates the financial performance. Originality/value It is the first comprehensive study in Asia analyzing the CS practices using both the panel data regression model and logit regression model.

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

Purpose - The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach - Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and Findings - The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications - The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value - This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

Corporate sustainability performance and firm performance: evidence from India and South Korea

This paper examines the association between corporate sustainability performance and firm performance in India and South Korea from different prospectives. The study is based on the sample of 28 listed non-financial firms from India and 26 from South Korea for a period of six years from 2008-2009 to 2013-2014. Market to book ratio is used to measure the firm performance. Content analysis is employed for calculating the disclosure score relating to sustainability performance using the reporting format of Global Reporting Initiatives. Employing appropriate regression models, the results reveal positive and significant association between CSP (both in terms of level and quality) and MBR for both countries. The study also finds significant impact of all the three components of corporate sustainability on MBR. Moreover, the relative influence of CSP on firm performance is foundto be more in South Korea than in India.

The association between budget goal clarity and managerial performance in Iraqi oil refinery: the role of budget goal difficulty and budget participation

This paper examines empirically the impact of budget goal clarity on managerial performance via two mediating variables - budget goal difficulty and budget participation in the context of oil refineries of Iraq. The study has employed path model to explain the impact of budget goal clarity on managerial performance in the presence of two mediating variables. Data were collected through a questionnaire based survey from 171 managers proportionately drawn from eight sub-refineries of North Refineries Company (NRC) of Iraq following stratified random sampling technique. The findings of the study indicate that the direct influence of budget goal clarity on managerial performance is positive and significant. The indirect influence of budget clarity is, however, found to be more than the direct influence. The study finds that budget participation significantly moderates the association between budget goal clarity and managerial performance. But the study fails to disentangle any significant influence of budget goal difficulty as a moderating variable in influencing managerial performance of NRC.

Disclosure of Corporate Social Responsibility and Firm Performance: Evidence from India

Corporate social responsibility (CSR) has emerged as a crucial research domain over the last decade due to the imperative that when CSR activities are communicated in the form of a report, it helps in improving firm performance. Thus, the main purpose of the present study is to analyse CSR disclosure trend in India and to investigate the association between CSR and the performance of the firm from 2008–2009 to 2013–2014. Content analysis is employed using Global Reporting Initiative (GRI) framework as a base to calculate the disclosure score relating to CSR and its components, that is, human related (HR) information, society related (SO) information and product related (PR) information. Firm performance is measured by Market to Book Ratio (MBR). CSR disclosure score is found to be increasing over the study period and regarding the components of CSR, the disclosure score of SO is found to be the highest (nearly 89 per cent) followed by HR (nearly 84 per cent) and PR (nearly 83 per cent). These scores are further utilised to find the influence of CSR (including its components) on firm performance using random generalised least squares (GLS) model. The results of the regression model indicate positive and significant impact of CSR (including its components) on firm performance.