Apr'22
The IUP Journal of Corporate Governance
Focus
The first paper, "Impact of Corporate Board Characteristics on Financial Distress of Firms in India: A Sectoral Analysis", by Pallavi Julasaria and Kumarjit Mandal, focuses on the relationship between financial distress and board characteristics. The author opines that financial distress, if identified at the onset, may lessen the possibilities of bankruptcy. CG is further linked with the existence of agency problem. The variables considered for the study are institutional ownership, number of board directors, number of board meetings, commissioner's proportion and managerial ownership. The author has discussed in detail the impact of these variables on different sectors, substantiating the results with evidence from literature.
The second paper, "Corporate Governance in Indian Adventure Tourism Sector: A Review", by Sriram Soundararajan, Upasana Singh and Sudeepta Pradhan, discusses governance issues in adventure tourism with reference to Indian tourists. The authors have extensively reviewed several papers in this area and noted the contribution of tourism industry to the economy and the associated governance issues. They opine that corporate governance practices are in the initial stage in adventure tourism sector. To streamline them would require consensus across various tourism industries controlled by various states. There is no mandate from the governments to impose CG practices. The authors call for standardizing the CG practices, as it has tremendous untapped potential in the tourism industry.
The case study, "Lakshmi Vilas Bank-DBS India Bank Merger: Done in Haste?", by Soumik Bhusan, Sankarshan Basu and G Naresh, captures the sequence of events relating to the merger between the Indian private bank Lakshmi Vilas Bank (LVB) and the Indian arm of foreign private bank DBS India Bank and the role played by the Reserve Bank of India (RBI), the country's central bank. The case captures the journey of LVB and its performance in the last five years, and its consolidation and merger with DBS India Bank. It also notes the timely regulatory interventions, governance issues and stakeholder's wealth protection. The case study discusses the aforementioned aspects in detail, providing insights for constructive discussion.
Consulting Editor
Impact of Corporate Board Characteristics on Financial Distress of Firms in India: A Sectoral Analysis
Financial distress refers to the inability of firms to fulfill their debt obligations. This paper studies the impact of certain corporate governance measures or board characteristics on the probability of financial distress in various corporate sectors (manufacturing and non-manufacturing) in India. The higher the institutional ownership, the lower is the financial distress for the majority of the sectors, except telecom where firms having higher institutional ownership are found to be more financially distressed. Higher managerial ownership leads to less financial distress in the consumer and transport equipment sector. Measures like board size, number of board meetings, and commissioner's proportion are found to have a different impact on the probability of financial distress in diverse sectors. It has been observed that they have a positive influence on some sectors and a negative influence on others. So overall, a sectoral difference was observed in the impact of various board characteristics on the financial distress of firms in India.
Corporate Governance in Indian Adventure Tourism Sector: A Review
The increase in the number of adventure tourists over the years has led to more academic research in the area. In India, adventure tourism is at a very nascent stage and is currently fragmented and informal. This study provides an insight into Corporate Governance (CG), adventure tourism in India and the legislations implemented in the industry. The tourism industry plays a very important role in the economic and sustainable development of a region. A thorough review of literature was conducted and the current state of CG in tourism sector and the challenges to its implementation are discussed. The study found that to adopt the best governance practices in the tourism industry, firms need to follow the principles of disclosure, fairness, accountability and corporate responsibility. The role of the government in the process has also been highlighted. .
Lakshmi Vilas Bank-DBS India Bank Merger:
The Reserve Bank of India (RBI), on November 17, 2020, issued two notifications with regard to Lakshmi Vilas Bank (LVB): (1) applying to central government for issuing an order placing LVB under moratorium, and (2) proposing an amalgamation of DBS Bank India with LVB. The government issued the order of moratorium on November 17, 2020 and sanctioned the amalgamation with effect from 27 November 2020. The merger of DBS India with LVB was an exceptional case where RBI and the government had to act on a fire-fighting made to protect the depositors' interests. This was also the first time when RBI resorted to the merger of an Indian entity with a foreign bank, which was also cleared by the government. This case study helps the reader to: (1) understand the performance parameters of a bank; (2) gain insights on the significant events that led to the downfall of LVB; (3) understand PCA and evaluate its implications; (4) learn about RBI's role in protecting depositors' interests; and (5) understand the timing of PCA and mechanisms to protect both depositors and investors.
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