Oct '21


The IUP Journal of Accounting Research and Audit Practices.

ISSN: 0972-690X

A peer reviewed journal indexed on Cabells Directory, and also distributed by EBSCO and Proquest Database

It is a quarterly journal that offers papers on Financial accounting, Management accounting, Accounting standards, Taxation, IT-accounting interface; R&D reporting biases and their consequences; Corporate disclosures and Standards of reporting reflecting better governance, Environmental accounting and reporting; Auditing research, Internal and external audits, Ethics in reporting, etc.

Privileged access to Online edition for Subscribers.

Focus Areas
  • Financial Accounting
  • Management Accounting
  • Forensic Accounting
  • Accounting Standards
  • Taxation
  • IT Accounting Interfacing
  • Auditing
  • Corporate Disclosures
  • Internal Audit
  • Audit of Financial Statements
  • Audit Education
  • Cost Audit
  • Tax Audit
  • Audit Standards and Assurance
  • Social Audit
  • Environmental Audit
  • Quality Audit
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Article   Price (₹) Buy
Is it Always Necessary to Time the Exit? Insights from Indian Venture Capital Market
50
The Impact of Liquidity on the Profitability of Nifty Pharma Index (NSE India)
50
Mergers & Acquisitions and Value Creation: A Banking Industry Perspective
50
Secretarial Auditing and Commercial World: A Handy-Dandy Approach to Prevention of Market Manipulation and Insider Trading
50
Risk Measurement of Indian Banks: A CSRISK Analysis
50
A Comparative Analysis of the Non-Performing Assets of Public and Private Sector Banks in India
50
Evaluation of Marketing Implications/Customer Perception of Service Quality of Banks in the Face of Commercial Bank Mergers in India: A Literature Review
50
CEO Gender and Employee Compensation: Evidence from India
50
Audit Practices Linked to Corporate Governance: A Literature Review
50
Accounting Conservatism and Corporate Governance: A Literature Review
50
Stakeholders’ Perception of CSR Practices: Evidence from Indian Companies
50
Currency Exposure of Equity Returns: Evidence from India
50
A Comparative Study of the Performance of Government Promoted Firms and Non-Government Promoted Firms: Evidence from India
50
Does Ownership Structure Impact Competitiveness of Firms in Their Product Markets? Evidence from India
50
Do Financial Constraints Matter in Accessing Agricultural Loan? Organic vs. Conventional Farmers
50
Financial and Social Impact of Skill Development Programs for Empowerment of the Tribal Community in Telangana State, India: An Empirical Study
50
Domestic Institutional Ownership and Firm Value: A Study of NSE 500 Companies
50
Dividends and Promoters: The Role of Controlling Shareholders in India
50
Internal Capital and Firm Financing: Evidence from Indian Group-Affiliated Firms
50
Pledging of Promoter Holdings and Earnings Management
50
Does Operating Cash Flow Volatility Impact Capital Structure Decision: An Empirical Study?
50
Determinants of Underpricing of IPOs in the Infrastructure Sector
50
Relevance of Gold Monetization Scheme as an Investment Option for Retail Customers in Hyderabad
50
Region-Wise Market Integration: Pre- and Post-Covid-19 Period in Asia- Pacific, GCC, Europe and US Markets
50
Measurement Comparison and Predictability of Range-Based Volatility Models
50
Does Low Volatile Index Perform Better Than High Beta Index During a Crisis Period Like Covid-19?
50
Does Re-Categorization Affect Mutual Fund Investment? A Comparative Study of Pre- and Post-Categorization of Mutual Fund Schemes in India
50
Mutual Funds: The Most Suitable Investment Avenue for Common People
50
Rise and Fall of LeEco: Will It Survive?
50
Accounting Scandal at Tesco
50
Modeling Sovereign Credit Score of US and UK
50
Managing Non-Performing Assets in Indian Banking Industry
50
SEBI and Its Role in Prohibiting Insider Trading
50
Financial Statement Analysis and Valuation Dilemma of WeWork (The We Company)
50
Financial Statement Analysis of Tata Consultancy Services Limited
50
Saudi Aramco
50
Toshiba's Accounting Scandal: A Spotlight on Japan Inc's Corporate Governance Systems
50
Samsung BioLogics – Accounting a Subsidiary as an Affiliate
50
Transformation of NGO to NBFC: Case of NMSPL
50
Goodwill Accounting – The Road Ahead
50
Open Banking in India – A Technology Revolution in the Banking Sector
50
The New Liquidity Management Framework of RBI: A Primer
50
India’s Fiscal Policy Measures During Covid-19: Hits and Misses
50
Coronavirus Impact on Indian IPO Market
50
The New Commodity Super Cycle
50
The Impact of Covid-19 Pandemic on Indian Mutual Fund Industry
50
       
Contents : (Oct'21)

Is it Always Necessary to Time the Exit? Insights from Indian Venture Capital Market
James Dominic

The study models the association among exit routes adopted by Venture Capital (VC) firms, Investee Firms (IFs) industry and the overall market condition. It examines 210 exit transactions in India, which occurred between 2000 and 2018, and finds that exits are seasonal irrespective of the exit routes. Bull markets are critical for exits irrespective of the exit routes. Venture Capital Funds (VCFs) try to time the market for exits irrespective of the route adopted for the exit. Surprisingly, buybacks are also associated with a bullish market which is characterized by high valuations. No industry is superior to any other industry in timing the market. However, Banking and Financial Services Industry (BFSI) possesses exit opportunities even in the bear market.


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Article Price : Rs.50

The Impact of Liquidity on the Profitability of Nifty Pharma Index (NSE India)
Suzan Dsouza and Houshang Habibniya

The paper examines the impact of liquidity on the profitability of Nifty Pharma Index (NSE India) listed on the National Stock Exchange (NSE) India. Liquidity is represented by current and quick ratios with working capital. In an attempt to measure the profitability, various factors like Return on Capital Employed (ROCE), sales, Return on Total Assets (ROTA) and Profit Before Tax (PBT) have been utilized. With a view to establishing the linear relationship between liquidity and profitability, a multiple regression model was used to analyze the statistical samples of Indian pharmaceuticals companies for a period of five years from 2012 to 2016. On the basis of overall analysis, it is therefore important to state that Current Ratio (CR) has a positive impact on ROCE, whereas Quick Ratio (QR) has a positive impact on ROTA. Sales is the strongest predictor of working capital. Hence, an unusual relationship between liquidity and profitability has been observed.


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Mergers & Acquisitions and Value Creation: A Banking Industry Perspective
Mousumi Bhattacharya and Sarit Biswas

The paper intends to measure the effects of Mergers & Acquisitions (M&As) on the stock prices and Financial Performance (FP) of the acquirer banks in India. A list of 28 M&As concerning acquirer banks registered on the National Stock Exchange (NSE), is used in this study. Event study analysis is used to gauge the outcome of M&As announcement on the market price of the banking company’s share, which measures the wealth creation of acquiring firm’s shareholders. DuPont (DP) analysis is used for the purpose of analyzing the FP of merged firm, but it failed to show any significant impact post merger in terms of Return on Assets (ROA), Return on Equity (ROE), net-profit margin, financial leverage and asset turnover. The fallouts designate that the market reacted negatively towards the M&As in banking sector of India, and also show a corrosion in the performances of the acquirer banks in the post-merger period.


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Secretarial Auditing and Commercial World: A Handy-Dandy Approach to Prevention of Market Manipulation and Insider Trading
Subhajit Chakraborty and Tamasi Biswas

Customary scrutiny of compliances reduces the chances of treacherous practices in corporations, thus securing the dignity of corporate entities. It attempts to win the confidence of potential investors and stakeholders in the quest of commercial affairs. In this juncture, the mechanism of “secretarial audit” is germane towards the promotion of corporate governance administration. Detection of Corporate Fraud is indeed a complex procedure given the numerous norms and regulations. Since corporate scams ordinarily are prevalent in the organized sector, it may prove to be ineffective in tracing down the reason behind such perpetration. Hence, intervention of a regulatory body is the need of the hour for ensuring transparency and accountability of the corporate bodies. Secretarial auditor, a chair of confidence in every organization, is vested with the responsibilities of “secretarial audit” for ensuring that compliance and corporate reporting are done in adherence to the existing laws. As we are all aware of the stringent laws for the protection of minority interest, financial discrimination and other allied aspects can be a crucial factor for oppression. On a similar track, insider trading and market manipulation can be the basis for both financial and reputation loss, rendering serious trouble to the entire stakeholders of the organization. This paper is based on doctrinal study and intends to discuss how the mechanism of secretarial auditing helps to minimize the legal challenges of insider trading and market manipulation confronted by the corporate bodies. The paper analyzes how the mechanism of “secretarial audit” can slump the rates of corporate frauds.


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Article Price : Rs.50

Risk Measurement of Indian Banks: A CSRISK Analysis
Satish Chandra Tiwari, Sandeep Kumar Keasarwani and Sikandar Azam

This paper proposes another proportion of foundational chance, namely, Capital Shortfall Risk (CSRISK), which recognizes a budgetary organization’s capital shortage under the most noticeably terrible situation restrictive on a significant market decay. The CSRISK list requires just open monetary information, including bookkeeping and market exchanging data, which is time and practice. The sample includes 251 Indian banks for the period of 20 years, starting from January 1, 1998 to December 31, 2018. The period is divided into three phases: pre-crisis (1998-2007), crisis (2008) and post-crisis (2009-2018)—data on returns collected from Yahoo Finance. The market value of equity and book value of debt are extracted from the Prowess database. Variable k is 9% (Basel norms II), which is the regulatory requirement by the Indian banks to maintain assets as a part of total assets. This fundamental hazard measure can be generally applied in the field of executives and macroprudential strategy making. The paper focuses on CSRISK using regression analysis approach. The study found that the larger the CSRISK, the greater the bank size; this could help risk managers to control the course of action. Banking regulators may evaluate the market capital shortfall proficiently and efficiently with the help of CSRISK in case of a troubled economic scenario.


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A Comparative Analysis of the Non-Performing Assets of Public and Private Sector Banks in India
D Sreenivasa Chary

Banks are obliged to repay the deposits to the public on due date with an embedded option for foreclosure. They can also take preventive, remedial and legal measures for recovery of loans. However, despite their best efforts, some loans become Non-Performing Assets (NPAs) as they do not generate income. On the other hand, banks are required to make provision out of the current year’s profits as a cushion against such NPAs. If such NPAs become irrecoverable, the resultant losses are required to be absorbed by banks. In this context, banks are required to maintain as much capital as required to meet the probable loan losses. The Reserve Bank of India (RBI) issued detailed guidelines to banks on classification of loan accounts and provisioning norms, called Income Recognition and Asset Classification (IRAC) norms. The two important groups of banks in India are public sector and private sector banks. The present study is an attempt to analyze the performance of these two banking groups in terms of classification and provisioning of their loan assets under standard, substandard, doubtful and loss assets as per RBI guidelines. The study observes that private sectors banks are comparatively better in maintaining standard assets and making adequate provision for the NPAs.


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Evaluation of Marketing Implications/Customer Perception of Service Quality of Banks in the Face of Commercial Bank Mergers in India: A Literature Review
D S Prasad

The paper reviews research on the linkages between select demographic and behavioral variables and customer perception of the banking service quality in the face of commercial bank mergers in India and seeks to identify gaps in the current body of knowledge which justify future research directions. The impact of bank mergers on customer service quality has attracted a great deal of attention during the last two to three decades in view of the ongoing consolidation of the Indian banking sector with a view to improving its efficiency and profitability. Using Systematic Literature Review (SLR) method, the study reviews papers from 37 refereed journals and other books published on the subject. Detailed content analysis reveals that most of the research is empirical and identifies brand equity, Customer Relationship Management (CRM) and innovative ability, among others, as the major factors influencing the customer perception (marketing implications of commercial bank mergers) of service quality of commercial banks in India in the face of mergers. In conclusion, the study found that demographic and behavioral variables and customer perception of the quality of service of the merging commercial banks in India are related and the bank managements must give due importance to the segmental differences while formulating their marketing strategies if they have to be successful in the emerging competitive commercial banking scenario of India. Future research may be carried out taking larger and more diversified samples of bank customers to generalize the research findings.


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CEO Gender and Employee Compensation: Evidence from India
Pavana Jyothi, P Bhanu Sireesha and Hussain Yaganti

In this study, we examine the impact of CEO gender on the compensation of Indian corporate employees. Based on the theoretical and empirical research in business ethics and leadership styles, which argue that females are ‘care’ and ‘relationship’ oriented, we hypothesize a positive impact on compensation. Our results show that the average compensation increased by about 14% when females took over the leadership and they pay a significantly higher compensation as compared to the industry averages. This increase is observed irrespective of the size, performance and growth of firms. However, the positive impact is weaker for highly levered firms.


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Audit Practices Linked to Corporate Governance: A Literature Review
S Sandhya

In this paper, a review of recent research on the connection of auditing with corporate governance practices is conducted. The role of auditing is to validate the financial statements, the system process and procedure. The assurance of goodness in these would lead to better corporate governance. A good corporate governance framework involves better managed internal processes and best use of investors’ money. The study identifies the linkage of auditing with corporate governance and also the contribution of its various components, namely, internal auditing function, external auditors and the audit committees for establishing good corporate governance practices. The studies reviewed found that auditing mechanism can effectively monitor and evaluate internal operations and ensure compliance; there can be fair view of financial statements and efficient risk management, thereby protecting investor’s interest. It can be inferred that high quality auditing practices can reduce misappropriations of resources, frauds and scams, reduce risk to all stakeholders, leading to better corporate governance in firms. In the absence of very recent research on this issue, this paper contributes to the existing literature wherein it reiterates the role of different components of auditing in corporate governance.


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Accounting Conservatism and Corporate Governance: A Literature Review
Rajneesh Ranjan Jha

The paper reviews the literature on accounting conservatism and its different dimensions. In literature, accounting conservatism is classified into two classes, namely, conditional accounting conservatism and unconditional accounting conservatism. Accounting conservatism plays an important role in shaping the corporate governance of any firm. It also interacts with other dimensions like board structure and ownership structure to decide the firm level of corporate governance. Board structure and accounting conservatism act as a substitute to each other. Accounting conservatism literature mainly focuses on advanced or developed nations, while research on emerging nations needs more attention. As there are institutional differences between advanced and emerging nations, the results generated from advanced nations cannot be generalized for the emerging nations. There are many unattended research gaps in the context of emerging nations like India, where ownership structure is concentrated and business group affiliation is a rule rather than exception.


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Stakeholders' Perception of CSR Practices: Evidence from Indian Companies
T Sita Ramaiah, Kishan Jee and Satish Chandra Tiwari

In recent years, companies have become more conscious of customer satisfaction while implementing social responsibilities compliance. The Corporate Social Responsibility (CSR) literature is tremendously rich. Numerous scholars and researchers have contributed to enriching the literature on CSR. Following a thorough review of literary texts on CSR, it was found that most crucial aspects of CSR have been explored and studied so far. The study helps to create a deeper understanding of essential and functional elements of CSR. CSR scope and models have been discussed by analyzing the amount of research reporting performed in this field in India and abroad over the last few years. The goal of the researcher is also to project the research gap that exists in this field and to concentrate on the topics that have received priority and attention in this regard. Surveys about CSR within the framework of a selling approach have shown that there is a positive relationship between consumer preference of products and social responsibility of the corporate. Thus, a trend is revealed towards consumers’ increasingly preferring products of a socially responsible company (Edelman, 2010). The results suggest that CSR activities induce positive CSR perception that improves performance. Furthermore, the results indicate that companies should consider employees’ perception of CSR and their feeling of attachment and long-term performance.


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Currency Exposure of Equity Returns: Evidence from India
M V S Kameshwar Rao and Ranajee

The paper studies the meager evidence on currency exposure of Indian companies. It addresses three research questions. What is the long-term currency exposure (FX Equity Beta) of listed firms in India? Does it show cross-sectional variation in firms and variation across industries? Is it time varying? With NSE 100 firms, currency exposure of equity returns to US Dollar (USD) is estimated at portfolio and firm levels for the period 2001-2016, and also for two sub-periods 2001-2008 and 2008-2016. Robustness of the estimates is verified using Composite Exchange Rate (CER). Long-term FX Equity Beta of Indian firms is negative and time varying, and varies across industries and firms. This evidence is contrary to the thinking that currency depreciation is good for emerging economies. The forex beta of the equity portfolio of NSE 100 firms to USD (CER) is –1.352 (–1.352), for 2001-2016; –1.718 (–1.704) for 2001-2008, and –1.283 (–1.256) for 2008-2016. Mean firm level FX Equity Beta on USD (CER) is –1.601 (–1.551) for 2001-2016; –2.078 (–1.875) for 2001-2008, and –1.667 (–1.803) for 2008-2016. Mean FX Equity Beta on USD (CER) of financial services firms is –2.221 (–2.215) and that of IT firms is –0.47 (–0.56).


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A Comparative Study of the Performance of Government Promoted Firms and Non-Government Promoted Firms: Evidence from India
D Satish

Promoters play a very important role in the performance of companies. In India, the average holding of promoters is very large at around 54%. These promoters are either government or private individuals and business houses. India started the privatization process in a big way in the early 1990s and also started disinvesting stakes in major public sector companies, while retaining a minimum of 51% stake in a majority of companies, in effect keeping the control. The paper with an objective to study whether there exists a significant difference in the performance of government promoted firms and private firms and found a significant difference in the performance between them using both independent sample t-test and pooled panel data regression. The paper is based on the data of public listed companies in India over a period of 11 years (2008-2019).


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Does Ownership Structure Impact Competitiveness of Firms in Their Product Markets? Evidence from India
P Bhanu Sireesha, Pavana Jyothi, Hussain Yaganti and Richa Gupta

Existing literature shows that monitoring the effect of concentrated ownership has a positive impact on firm value. However, the economic channel of such a positive impact has not been examined. This study offers a possible economic channel and tests it empirically using a panel of Indian firms. The hypothesis of the paper is that concentrated ownership increases the competitiveness of the firms, through efficient monitoring of their activities, in their product markets, thus increasing the growth rate of firms. The results show that both institutional and promoter ownership have a positive impact on firm competitiveness. However, foreign concentration has an insignificant impact. Moreover, for business group-affiliated firms, only institutional concentration has a positive impact. The results remain robust for different specifications and endogeneity issue.


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Do Financial Constraints Matter in Accessing Agricultural Loan? Organic vs. Conventional Farmers
Md Sikandar Azam, Satish Chandra Tiwari and Harsh Raj Pathak

Economic empowerment and sustainable livelihood of small and marginal farmers have become a major challenge in India. The NSS survey report indicated that around 40% of farmers are willing to quit farming and seek other means of economic survival. The ease of agricultural credit for the financially weak farmers can significantly help them to sustain. This study aims to understand the relationship between the financial position of organic and conventional farmers and their accessibility to agricultural loans. The primary data from 400 farmers has been collected from organic and convention farmers. To address the objectives, a Binomial logistic regression model has been used to examine the impact of financial position in accessing agricultural credit. The study revealed that educated, large-scale, and financially sound farmers benefited more from financial institutions, whereas economically deprived small and marginal farmers were unable to access agricultural credit due to illiteracy, lack of awareness, and lengthy documentation. The study suggests that generalization of loan waived should be avoided. Further, the required documents for availing agricultural credit for the economically weak and uneducated small and marginal farmers need to be simplified that could minimize the non-institutional sources of loan.


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Financial and Social Impact of Skill Development Programs for Empowerment of the Tribal Community in Telangana State, India: An Empirical Study
P Vijaya Kumar

Telangana is a new state of the Indian Union that was formed in 2014 after a prolonged and relentless struggle. Close to 10% of the total population belongs to the tribal community. The tribes are socially and economically backward in the state when compared to other communities. The Telangana government has initiated a number of skill development programs for the tribal people to get employment and entrepreneurship opportunities and to improve their socioeconomic status. The study is an empirical evaluation of the skill development programs for the socioeconomic development of the tribes which are being implemented in the state. The tools used for the analysis are percentage, chi-square, t-test and ANOVA. The study found that the skill development programs are helping the tribes to get employment and entrepreneurship opportunities and to improve their socioeconomic conditions. The skill development schemes have a positive impact on the socioeconomic status of the tribal beneficiaries, and they have expressed satisfaction as there is significant social advancement in their lives.


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Domestic Institutional Ownership and Firm Value: A Study of NSE 500 Companies
Pranati Mohapatra

The paper studies the impact of Domestic Institutional Ownership (DIO) upon firm performance in India using panel data for NSE 500 companies from 2010 to 2016. The study finds DIO to have a positive impact on Tobin’s Q in panel regressions-fixed effects after using controls such as firm age, size, leverage, marketing intensity, foreign institutional ownership and promoter ownership. The study also tests the impact of Mutual Fund Ownership (MFO) and the impact of Banks, Development Financial Institutions (DFI), Insurance companies’ (BFII) ownership separately and found MF has a positive impact on Tobin’s Q. The study observed that all variables DIO, MF and BFII had no impact on Return on Assets (ROA) but BFII is found to have a negative impact on Return on Equity (ROE). The study found a positive impact of Mutual Funds (MFs) and a negative impact of ‘Banks, FIs and Insurance companies’ on firm performance in India. The paper contributes to the empirical literature on institutional ownership and firm performance in emerging economies. It has important implications for firms, investors, corporate policy makers and researchers particularly, in India.


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Dividends and Promoters: The Role of Controlling Shareholders in India
Geeta Singh and S Vijayalakshmi

The paper investigates the lesser researched area of possible association between promoter equity ownership and dividend policy. Firms in India have concentrated ownership of promoters and thus, promoters may influence the firm’s various decisions, including its dividend policy. The paper tests the relation between the promoter ownership and dividend payment, after controlling several firm characteristics such as size, return on assets, cash ratio and leverage. Based on panel data of Nifty 100 firms from March 2011 to March 2019, evidence for a positive relation between the promoter’s equity ownership and dividend payment is provided. The results are in line with the reputation building hypothesis. This hypothesis suggests that the positive relation between promoter ownership and dividend payout is a result of reputation building mechanism such that firms intend to send a positive signal to the market and investors that they are not expropriating the rights of minority shareholders.


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Internal Capital and Firm Financing: Evidence from Indian Group-Affiliated Firms
Akanksha Saxena and Shilpi Banerjee

In this study, we examine the phenomenon of the existence of internal capital market among business group firms. Researchers in this field use the existence of the internal capital as a base to explain the difference between group and stand-alone firms with respect to various financing decisions. Using a panel of Indian listed firms, we analyze the equity and debt components of the internal capital market. We find that for group firms, the debt component of internal capital exists mainly in the form of intercorporate loans. And among equity components, it exists in the form of promoter and intercorporate shareholdings. However, for stand-alone firms, debt from promoters’ loans, fixed deposits from promoters and deferred credit are higher and so are equity from persons acting as promoters and institutions and Hindu Undivided Families (HUFs).


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Pledging of Promoter Holdings and Earnings Management
Sager Reddy Adavelli and CMA Srikanth Potharla

Pledging of shares by the promoters induces them to follow earnings management when financial performance is poor, as the fall in reported earnings will have imminent negative impact on stock price. By analyzing the unbalanced panel data of 158 companies for the period of 2012-2018, the study corroborates the debt covenant hypothesis, as the pledge ratio has a significant positive impact on earnings management. The study also evidenced significant negative impact of operating cash flows on the earnings management, which may be attributed to the reason that when operating performance is poor, firms are more induced towards earnings management in order to report better profits.


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Does Operating Cash Flow Volatility Impact Capital Structure Decision: An Empirical Study?
Nitya Nand Tripathi and Naseem Ahamed

The paper examines the relationship between Operating Cash Flow (OCF) volatility and debt usage in the capital structure of firms. Using the model used by Bates et al. (2009) and Frank and Goyal (2009) on a sample of 22,798 firm-years data points, we found that there is an inverse relationship between the debt component of capital structure and OCF. We also found a positive relationship between total debt (adjusted for total market value of the firm) and volatility of the OCF both in the full sample and the two highest quartiles. An increase of one standard deviation in OCF volatility causes a 5% increase in total debt in the capital structure. Hence, increase in OCF volatility of a firm leads to increased borrowing. The paper is probably the first to examine the relationship between OCF volatility and debt proportion of the capital structure in the Indian context.


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Determinants of Underpricing of IPOs in the Infrastructure Sector
Abhishek Sinha

The infrastructure sector determines GDP growth. With debt drying up in India due to increasing Non-Performing Assets (NPAs), equity has become an important source of funding. The promoter who is raising the money and is selling his equity through offer for sale, is not able to maximize his returns, as the stock markets evidence 25%-30% underpricing. Hence, there is a need to identify the drivers of underpricing in the infrastructure sector, as there is limited study in this area. The study has identified 23 variables from literature and then vetted the variables from 10 industry experts. The data comprises stocks listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in the period 2003 to 2015 collected from Prime Database, BSE and NSE website. To avoid overfitting, Principal Component Analysis (PCA) followed by stepwise regression are used to identify factors driving underpricing. Ten factors related to the market, fundamental and macroeconomic factors are identified as drivers of underpricing in infrastructure sector. Hence, factors such as economic growth, balance sheet size and hot and cold period are the drivers of underpricing in infrastructure sector. The management should take cognizance of these drivers while listing the stock in the market to reduce underpricing.


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Relevance of Gold Monetization Scheme as an Investment Option for Retail Customers in Hyderabad
Shree Jyothi Koutha

Traditionally, Indians have been known as accumulators of gold, who take pride in investing huge amounts in collecting gold jewelry. However, this investment is confined to lockers either at home or in banks for most of the time without earning any returns for the investors, except for gratifying their family pride and prestige. The Indian government has come out with a scheme of monetizing this, literally speaking, gold mine, wherein the gold gets deposited and attractive returns are assured on maturity with active involvement of banking sector, both private and public. The paper attempts to study the popularity and success of this Gold Monetization Scheme (GMS) among bank customers and the reasons thereof.


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Region-Wise Market Integration: Pre- and Post-Covid-19 Period in Asia- Pacific, GCC, Europe and US Markets
Munawar Sayyad, Manu Sreenivasan, Kaushik Bhattacharjee and Vijayalakshmi S

Covid-19 crisis has impacted almost all the economies with different severity. Due to the shocks by this pandemic, the usual interrelationship between the stock markets also got affected. This paper aims to quantify the changes in the interconnectedness and comovements in the pre- and during Covid-19 period for 18 international stock exchanges spread across the world. The study included returns of 18 stock indices and analyzed the short-term dynamics change using the changes in the pair-wise correlations. For changes in the long-term equilibrium relationship, we have used the Johansen’s cointegration tests and compared the changes in the speed of adjustments. Also, we have made common trend analysis using Stock Watson methodology to corroborate the findings of cointegration tests. Tests were used to know the impact on stock markets for the pre-Covid-19 and during Covid-19 across the globe. Finally, we analyzed the volume of the transactions during Covid-19 and pre-Covid-19 for the different stock markets to find out the severity of the shocks at an individual level.


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Measurement Comparison and Predictability of Range-Based Volatility Models
Rama Krishna Yelamanchili and Sager Reddy Adavelli

Extensive research is going on in applied finance and econometrics on modeling the volatility of financial assets. Contemporary research uses most sophisticated methods to model the volatility. However, there exists two different schools of thought on the input variable, i.e., measure of volatility series. One school of thought advocates volatility measured using close-close price and the other school posits use of extreme values, that is, Open, High, Low and Close (OHLC). Little empirical work has been carried out on this topic in the Indian context. Using 1,421 daily observations of each of the three highly volatile sector-specific stock indices in India, we measure, compare and assess predictive ability of close-to-close estimator, Parkinson’s and Garman and Klass’s extreme value estimators over the period January 1, 2016 to September 30, 2021. The results of relative efficiency measures indicate superior performance of Extreme Value Methods (EVMs) over classical method. Furthermore, the results of 483 cross-sectional regression tests indicate the predictive ability of EVMs and report statistically significant t-statistics for a majority of the periods. It is also observed that EVMs have low standard errors when outliers are weeded out. Similarly, EVMs have t-statistic values and are statistically significant at 1% level during highly volatile market conditions. Our results support the argument that use of volatility measured with EVMs is efficient and suggest its use in modeling volatility of financial assets.


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Does Low Volatile Index Perform Better Than High Beta Index During a Crisis Period Like Covid-19?
VDMV Lakshmi

The paper examines if low volatile index acted as a safe haven by exhibiting better performance than high beta index during the recent Covid-19 pandemic. The study period is divided into three sub-periods (pre-Covid, Covid and post-Covid). A portfolio consisting of long position in high beta index and short position in low volatile index (HML) has been formulated during pre-Covid and post-Covid periods. The portfolio has been rebalanced with long position in low volatile index and short position in high beta index (LMH) during Covid-19 period. The study applies Jensen differential return model and Treynor-Mazuy market timing model to assess the performance of the portfolios. The study finds no evidence that low volatile index performs better than high beta index during the crisis period. There is also no evidence that high beta index performs better during stable periods. However, there is clear evidence of benchmark Nifty 50 having significant impact on the two indices and the portfolios.


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Does Re-Categorization Affect Mutual Fund Investment? A Comparative Study of Pre- and Post-Categorization of Mutual Fund Schemes in India
Harsh Raj Pathak, Kaushik Bhattacharjee, Sonali Narbariya and Md Sikandar Azam

In light of the growing importance of mutual fund investment in academic and industrial research, the paper aims at answering a question of paramount importance, i.e. Does re-categorization affect mutual fund investment? An unmatched sample t-test was conducted to compare the pre- and post-categorization among the large, mid, and small-cap firms based on three variables: liquidity, volatility, and returns. The results of the t-test postulate that the liquidity of large-cap firms and returns of the small-cap firms were significantly different for both periods of study. In contrast, all other variables remain indifferent across both periods. Overall, the study contributes to the literature and practice by providing meaningful pre- and post-categorization insights. The study provides important insights for mutual fund managers to understand the correct effect of re-categorization on market efficiency. The study provides transparency for future research in the field of mutual fund investment.


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Mutual Funds: The Most Suitable Investment Avenue for Common People
Divya Mittal

The study emphasizes that mutual fund is the most suitable investment avenue for common persons. The study investigates the popularity of mutual fund investments in the present scenario. The paper consisted of 281 usable samples of mutual fund investors. The variables were measured on a five-point Likert scale, which starts from 1 = strongly disagree to 5 = strongly agree. The selected method of data analysis included descriptive analysis, reliability and validity analysis, percentage, and regression analysis to test the validity, reliability and research hypotheses with the help of Statistical Package for the Social Science (SPSS version 16.0). The study found that popularity of mutual funds has increased in today’s market. This paper suggests that mutual funds are the most suitable investment avenue for common persons due to high returns with low risks, portfolio diversification investment scheme, tax benefits, rating of funds by renowned agencies, and so on. This study would help the mutual fund companies and their managers in designing innovative products and services according to the needs of the investors. It would also help in developing and expanding knowledge in the field of mutual fund investment and planning.


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Rise and Fall of LeEco: Will It Survive?
D Satish

LeEco, a leading Chinese conglomerate company, had ambitious plans to build a global ecosystem of products and take on bigwigs like Apple, Google, and Samsung. But the plans of Jia Yueting (Jia), Founder of LeEco, to create a great ecosystem came crashing down as the company’s revenues slowed down even as expenses mounted, leading to liquidity issues and financial woes. The company ended up staring at a huge debt. LeEco, which had 15 subsidiaries and 68 affiliated partners, also had questionable related party transactions. With a plummeting share price, trading in its shares on the stock exchange was halted by the company. Amongst the gloom came a ray of hope with Jia being replaced by Sun Hongbin (Hongbin) as Chairman of LeEco. Sun is a successful Chinese real estate baron who had invested considerably in LeEco and infused $2.4 bn to bail it out. LeEco’s failure also resulted in the Chinese regulators’ scrutinizing shared ecosystem companies and asking them to make more disclosures and reduce related party transactions—steps which could have a major impact on Chinese tech companies. The case brings out the scope of questionable accounting policies and earnings management in related party transactions in a shared ecosystem environment and the challenge that it poses to the regulators. The case also allows for a discussion on whether LeEco’s failure would have an impact on Chinese start-ups as well as on its tech companies. Finally, the case allows for a constructive debate on what should Sun do to bring LeEco out of the muddle.


© 2018, IBS Center for Management Research. All rights reserved. For accessing and procuring the case study, log on to www.thecasecentre.org or www.icmrindia.org.

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Accounting Scandal at Tesco
Pranati Mohapatra and Nagendra Kumar M V

The voluntary disclosure of misrepresentation of financial statements by the management of the UK-based retailer Tesco plc (Tesco) in September 2014 impacted the market price of its share, affecting the investment value of its shareholders. The shareholders expressed resentment over the negligence of Tesco’s management and filed legal suits against it, demanding compensation for the losses they had suffered as a result of the misrepresentation. The case focuses on the events that led to the misrepresentation of financial statements – the market position, process of determining the revenue streams, relationship with suppliers, and related issues. The case focuses on the steps initiated by the management of Tesco to overcome the crisis situation, and the role of regulatory authorities in handling the situation. Further, it provides scope for a discussion on the importance of accounting principles and their role in determining the investment objectives of various stakeholders. It also provides scope for a discussion on the importance of ethics in the auditing profession and the challenges faced by the auditors.


© 2018, IBS Center for Management Research. All rights reserved. For accessing and procuring the case study, log on to www.thecasecentre.org or www.icmrindia.org.

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Modeling Sovereign Credit Score of US and UK
D Satish

Credit Rating Agencies (CRAs) play a crucial role in reducing the asymmetry in the information available to the issuer and investor. This role gains even more significance when rating is for sovereign entities and their securities. The CRAs like S&P, Moody’s, and Fitch, which rate sovereign entities, consider a number of variables, both qualitative and quantitative, to assess the creditworthiness and rating of these entities and their securities. The case study gives a view of the sovereign credit rating industry, its major players, the industry issues and controversies. It also discusses the variables and parameters used by these big three agencies to rate sovereign entities. Most importantly, the case study helps the students to develop a basic model taking generally accepted variables to arrive at a credit score for two of the largest economies in the world – the US and the UK. This will help the student appreciate the various variables that go into sovereign credit rating apart from helping them to develop a basic model and analyze the creditworthiness of the two sovereign entities. The case also comes with Excel supplements.


© 2019, IBS Center for Management Research. All rights reserved. For accessing and procuring the case study, log on to www.thecasecentre.org or www.icmrindia.org

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Managing Non-Performing Assets in Indian Banking Industry
Koya Raghunath and Manish Agarwal

The case discusses the issue of high Non-Performing Assets (NPAs) in the Indian banking system in the first two decades of the 21st century. It covers in detail the various steps taken by the central bank of India and the Government of India (GoI) to bring down the NPAs, and how Gross Non-Performing Assets (GNPAs) went down by 1 tn in the financial year 2019 when compared with the previous financial year. Although the GNPAs had gone down by close to 1 tn in FY19, bad loans were still very high. Some experts opined that the high number of bad loans would continue as long as the Public Sector Banks (PSBs) remained under the shadow of the government. They commented that the RBI and the GoI should take more stringent steps to clean up the balance sheet of banks.


© 2020, IBS Center for Management Research. All rights reserved. For accessing and procuring the case study, log on to www.thecasecentre.org or www.icmrindia.org

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SEBI and Its Role in Prohibiting Insider Trading
Richa Gupta and Smita Ray

The case describes the role played by the Securities and Exchange Board of India (SEBI) in regulating the securities market to prohibit insider trading activities. It starts out with a brief history of insider trading and then explains the need for a regulatory body in the Indian Capital market. It then describes the various SEBI Acts, starting with the SEBI Prohibition of Insider Trading Act 1992, and the subsequent amendments in 2002, 2015, and 2018. The case also covers the process of investigation under the SEBI Prohibition of Insider Trading, 1992. Besides, it highlights the challenges faced by SEBI in prohibiting insider trading. It also shows that the cases of insider trading have been increasing and concludes by stating that more support from the Government of India (GoI) will help SEBI in controlling insider trading more effectively.


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Financial Statement Analysis and Valuation Dilemma of WeWork (The We Company)
D Satish

WeWork, the New York-based start-up that revolutionized commercial real estate by offering flexible shared workspaces, attracted massive investments from the likes of SoftBank, Goldman Sachs, JP Morgan Chase & Company, and many other top private equity players. WeWork’s valuation soared to more than $47 bn in January 2019. But its mandatory filing of S-1 papers on August 14, 2019 with the Securities and Exchange Commission (SEC) to go public left investors unconvinced, as they felt that the company did not deserve such a high valuation. WeWork’s complex corporate structure, questionable corporate governance and business practices, and less than anticipated financial projections drove away potential investors. Adam Neumann (Neumann), WeWork’s CEO, found himself in the middle of the controversy with some analysts questioning the transactions between him and WeWork. The controversy led to a failed Initial Public Offering (IPO) and to Neumann exiting WeWork. The case study captures the growth story of WeWork and its valuation journey through a series of findings. It delves deeper into the issues of complex corporate structures, a non-transparent corporate culture, questionable related party transactions, and iconic entrepreneurs and valuations which might not match the fundamentals. The case also gives an opportunity to students to analyze the Space-as-a-Service (SPaaS) industry, work out the relative valuation of WeWork with a close industry peer, and analyze the financial statements of WeWork.


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Financial Statement Analysis of Tata Consultancy Services Limited
S Vijaya Lakshmi

Tata Consultancy Services Limited (TCS) is a global Indian Information Technology (IT) company and a leading company in the Indian IT space. TCS enjoys a high net profit margin and has a liquid and debt-free balance sheet. This case study covers the background of TCS and highlights its financial performance. It provides sufficient information for a ratio analysis to be done of TCS. Additionally, it helps to analyze the financial performance of TCS through common size analysis, common base analysis, and DuPont analysis. This case helps students to understand the financials of IT companies.


© 2019, IBS Center for Management Research. All rights reserved. For accessing and procuring the case study, log on to www.thecasecentre.org or www.icmrindia.org

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Saudi Aramco
Alok Kavthankar and Indu Perepu

In early 2016, the largest state-owned oil company in the world, Saudi Arabia-based Saudi Aramco (Aramco), declared a proposal to float an IPO. The crown prince of Saudi Arabia, Prince Salman, had stunned the world when he declared in early 2016 that Aramco’s worth would be around $2 tn. Aramco was not only an oil company but a budget to run the nation as 85% of Saudi Arabia’s budget came from the tax which Aramco had to pay. The intent to monetize the state jewel came at a time when the economy of the Kingdom was under pressure. A widening fiscal deficit and depleting foreign reserves indicated that it was no longer viable to depend on oil exports to run the nation. There was a need to diversify and the impetus to do so would come from the proceeds of the IPO. But the IPO which would decide the fate of 33 million Saudis would come with its own set of challenges. The success of Aramco’s IPO would be a function of numerous factors—some in the Kingdom’s control and some beyond. In 2017, concerns about climate change were on the rise. Climate policies threatened to put a 40% discount on Prince Salman’s $2 tn aspirations. The commitment of global leaders to keep a check on global warming would escalate proliferation of renewables across the world and further build a pessimistic outlook for the future of oil prices. It remained to be seen how an IPO would shape the nation and how an oil giant would shape the future of world climate.


© 2018, IBS Center for Management Research. All rights reserved. For accessing and procuring the case study, log on to www.thecasecentre.org or www.icmrindia.org

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Toshiba’s Accounting Scandal: A Spotlight on Japan Inc’s Corporate Governance Systems
D Satish

On July 21, 2015, the top management executives of Japanese major, Toshiba Corporation, resigned over allegations of encouraging irregular accounting practices across various divisions of the company. Despite putting in place high corporate governance standards, it was found that various divisions resorted to window dressing due to various compulsions. The case study goes beyond the accounting scandal at Toshiba, highlighting different ways in which the accounts were manipulated. Also it looks into whistleblower policy and corporate governance systems at Toshiba in particular and Japanese corporations in general.


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Samsung BioLogics – Accounting a Subsidiary as an Affiliate
K B S Kumar

Samsung BioLogics, South Korea-based biopharmaceutical company, was established in 2011, as a future growth engine of conglomerate Samsung Group. The company, one of the largest contract manufacturers in the country, operated through three domestic plants. The case is about the accounting of Bioepis, a joint venture between BioLogics and US-based biotechnology company Biogen that was started in 2012 as an 85:15 joint venture.


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Transformation of NGO to NBFC: Case of NMSPL
C Anitha, S Galab and D Raghunatha Reddy


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Goodwill Accounting – The Road Ahead
AV Vedpuriswar


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Research Note
Open Banking in India – A Technology Revolution in the Banking Sector
M Saritha


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Research Note
Stressed Assets Bank
Rajinder S Aurora and Roopali Srivastava


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Research Note
The New Liquidity Management Framework of RBI: A Primer
Davinder Suri


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Research Note
India’s Fiscal Policy Measures During Covid-19: Hits and Misses
Davinder Suri


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Research Note
Coronavirus Impact on Indian IPO Market
Dimple Pandey


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Research Note
The New Commodity Super Cycle
Sarika Rachuri


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Research Note
The Impact of Covid-19 Pandemic on Indian Mutual Fund Industry
Dimple Pandey


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