The IUP Journal of Financial Economics - Economics Journals

Economics

The IUP Journal of Financial Economics

June' 07

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Articles

Equity Security Prices, Investors' Planning Horizon, and Corporate Financial Planning

-- Stanley C W Salvary

Information contained in the security prices are relevant to different segments of the financial community. Given the most appropriate methodology, each segment attempts to extract the information relevant to its decision. This paper posits that the Net Present Value (NPV) (share market price less book value of that share) of a firm's equity security, contains information relating to the Average Planning Horizon (APH) of the equity investors. Given general uncertainty and volatile financial market conditions, this study suggests that the messages contained in the NPV may be potentially useful for corporate financial planning.

Women Empowerment and Credit Control An Empirical Analysis on Credit Recipients of Grameen Bank in Bangladesh

-- Rafiqul Bhuyan Rafiq ,
Shahnaz Abdullah and Hamid Ahmadi

This paper analyzes the relationship between women's decision-making regarding loan use, and their empowerment. Using a new analytical framework, it reassesses the effect of decision-making on empowerment index. It also presents the hypotheses and tests contrasting situations: decision-making by men, by women and by both together, with regard to the empowerment index. Using primary data from Grameen Bank, the pioneer of microfinance institutions, the authors conclude that women are more empowered when they are involved in decision-making, either solely or jointly with their husbands. On the contrary, when the women are not involved in the decision-making of the loan use, they are less empowered.

Do Large Hedgers and Speculators React to Events? An Analysis of Stability and Events

-- Ikhlaas Gurrib

Using Commodity Futures Trading Commission (CFTC) and Commitment of Traders (COT) data, this paper analyzes whether large hedgers and large speculators were influenced by the major economic events of the 1990s. Eight major economic events are analyzed for a period of 10 years, and findings support that these informed players were hardly affected by the major events. The trading determinant model, mean equation model, and risk and return relationship model, suggests that the behavior and performance of these key market players were stable, and any significant structural break were short lived. The use of standard deviation as a measure of risk captured more breaks in the risk and returns relationship model, due to its higher sensitiveness to futures prices in the 29 US futures markets.

Factoring Services: Nectar for Corporate Liquidity

-- Deepak Devgan and Harpreet Dusanjh

The modern day economies are passing through a phase of conversion, and service sector is grabbing the share of agriculture and industry in the Gross Domestic Product (GDP) of the world. The predominant among the service sector are the financial services that are growing by leaps and bounds. As no business can survive without ensuring liquidity, therefore, for catering this requirement, a novel innovation in services called `Factoring' has shown its face. To pursue growth objectives, the manufacturers and the suppliers create a plenty of book debt, the delayed payments of which may hamper future production and sales. These people can take shelter of factoring services to ensure smooth running of their businesses. Through factoring, business community has got not only financial support, but also management support. The present paper is an attempt to study the dynamics of factoring and also to review the progress of factoring services worldwide in general, and in Asia and India in particular.

Small and Medium Enterprises' Financing and Investment Decision: An Empirical Study

-- Sanjeev Gupta,
Shaveta Gupta, Anu Sahi and Nitish Kamra

The Small and Medium Enterprises (SMEs) are of immense importance for the social and economic development of any economy. They significantly account for the gross domestic product of a country. But still majority of the Asian countries are suffering from underdeveloped SMEs. Though all firms face financial constraints, but as far as the SMEs are concerned, the picture is quite diverse and worse than other organizations. Few major reasons for this can be attributed to the dearth of finance, defective economic system, and imperfect financing and investment decisions. Keeping this in mind, this paper is an attempt to showcase the current practices of the SMEs of Punjab, regarding their financing (Capital Structure) and investment (Capital Budgeting) decisions. Around 75 SMEs of Punjab were surveyed, and the results were based on their response to various attributes. The paper also attempted to convey the general perception of the SMEs towards capital budgeting and capital structure decisions.

Innovative Strategy and its Welfare Implications

-- Rimi Mutsuddi and Indranil Mutsuddi

Indian corporate leaders have done well in standing up to global giants who caught them unprepared in 1991. Their companies have grown in size and market share. Some have even entered new international markets. But Indian corporations need to look beyond this into the uncertain future, in order to win the next round. Infact, business organizations would need distinct products, processes, technologies, business models and organizations so as to successfully manage these challenges. The bottom line and the key success mantra would be innovation. In this background, the paper attempts to examine some issues, which would enable organizations to explore their business strategies in order to enhance their competitiveness, through innovation and market integration. The paper also emphasizes on building empirical models to illustrate the role of innovative strategies in business organizations, and how innovation could help organizations of developing countries, to compete with technologically advanced foreign organizations. The paper attempts to depict how innovation and market integration could benefit both domestic as well as foreign organizations in the long run.