Firm Ownership Type, Earnings Management and Auditor Relationships: Evidence from India

Using data on Indian listed companies for 2005, the paper examines how firm ownership relates to auditor choice. More specifically, we test several hypotheses about the links between firm ownership, auditor relationships and earnings management. The results indicate that firms having high discretionary accruals are less likely to be audited by domestic entities. The analysis also suggests that domestic auditors are less likely to be preferred by both foreign and Indian private corporates.external auditing; firm ownership; multiple auditors; earnings management; ordered logit; India

Capital requirements, bank behavior and monetary policy: A theoretical analysis with an empirical application to India

The paper addresses the issue of monetary policy transmission through the banking sector in the presence of a bank capital regulation. A model of bank behavior is presented, which shows how a monetary policy shock affects both deposit and lending, in the short run (when equity capital is assumed to be fixed) as well as in the long run (when equity is endogenous). The analysis is extended to incorporate a salient feature of Basel II incorporating loans with differential risk weights. The findings are contrasted with those obtained under the 1988 Accord and the implications of the analysis are explored.Basel Accord; Bank equity; Credit risk; Monetary policy

External Auditing, Managerial Monitoring and Firm Valuation: An Empirical Analysis for India

The paper examines how external auditing and managerial ownership relate to firm valuation. It is argued that both external auditors (which serves as an external monitoring function) and managerial ownership (which serves as an internal monitoring function) affect firm value, while internal monitoring by managers and external monitoring by auditors were viewed as substitutes or complements. After controlling for the effect of exogenous variables, the results reveal the existence of a substitution monitoring effect between auditors and the managerial group. Additionally, firm valuation is found to be a significant determinant of managerial ownership. A disaggregated analysis of firms according to size and leverage suggests the existence of a complementary monitoring effect between auditors and managers, especially for low-leveraged firms.corporate governance; external auditing; managerial ownership; adjusted Q; India

Charter Value and Risk-taking: Evidence from Indian Banks

The article examines the determinants of banks’ charter value and its disciplining effect on bank risk-taking since the mid-1990s. The analysis indicates that deposit and loan market concentration exert a significant effect on charter value, suggestive of a strong link between competition and charter value. Among the traditional banking activities, bank size and efficiency are found to be important determinants of charter value. The disciplining effect of charter value is robust across several measures on bank risk.banking; charter value; risk-taking; capital buffer; prudential regulation; India

Price jitters: Do markets punish political stocks?

The paper examines the impact of firms exhibiting political connection on their stock market performance. The results appear to suggest that the performance of ‘political’ stocks has been significantly weak. This is apparent in simple univariate tests that compare the political stocks across various industry categories or even comparisons of political versus apolitical stocks. The regression analysis indicates that the returns on political stocks are on average, over 20% lower as compared to stocks without any political association.political connection; buy-and-hold abnormal returns; India

Productivity and Financial Structure: Evidence from Indian High-Tech Firms

The paper utilizes data on high-tech Indian firms for 1996-2007 to explain the association between leverage and productivity. Accordingly, firm-level productivity measures are regressed on a set of control variables, which includes leverage among the regressors. The findings suggest that low leveraged firms tend to be more productive, on average. Robustness tests support the results.productivity; financial structure, leverage; India

Does Political Competition Matter for Economic Performance? Evidence from Sub-national Data

The study utilizes data on major Indian states for 1980-2004 to explore the impact of political competition on state-level income and fiscal variables. The findings suggest that increase in political competition leads to an increase in state per capita income and growth. Focusing on fiscal variables, the analysis indicates that tighter political competition increases economic expenditure.political competition; economic performance; fiscal policy; sub-national; india

The dividend strategy of Indian companies: An empirical assessment

The paper uses firms across different ownership categories to examine the factors influencing dividend policy. The results suggest that bigger, mature and low-leveraged firms tend to pay more dividends. As well, the findings suggest that bigger, less profitable and high-leveraged firms are more likely to initiate a dividend cut.dividend strategy; leverage; firm size; manufacturing; India

Firm Characteristics, Financial Composition and Response to Monetary Policy: Evidence from Indian Data

The article examines the evidence for credit channel on the composition of corporate finance during tight and loose periods of monetary policy, using micro-level data on Indian firms for 1995-2007. The findings provide evidence in favor of the relationship lending view, although the magnitude and extent of the response varies according to firm characteristics.monetary policy; corporate finance; leverage; Altman-Z; relationship lending; India

Monetary policy and bank behavior: Empirical evidence from India

The paper develops an empirical model to explore the role that bank characteristics play in influencing the monetary transmission process. Employing data on Indian commercial banks for the period 1992-2004, the findings indicate that for banks classified according to size and capitalization, a monetary contraction lowers bank lending, although large and well-capitalized banks are able to shield their loan portfolio from monetary shocks.monetary policy; banking; India