This study examines the effect of friendly boards on capital allocation efficiency. We provide evidence that firms with friendly boards have a positive and statistically significant effect on capital allocation inefficiency. We find our results robust to different measures of friendly boards and capital allocation inefficiency, alternative model specifications, omitted variable bias, self-selection bias and other endogeneity concerns. We also show that the positive association between friendly boards and capital allocation inefficiency is lower in firms with high external corporate governance quality but higher in firms with high financial constraints. The findings imply that poor board monitoring and high agency conflicts in firms with friendly boards lead to high capital allocation inefficiency.
The Indian Economic Journal, Ahead of Print. The augment of economic globalisation and financial integration in the past few decades has changed the dynamics of international developments. This has resulted in discussions on the immediate and frequent impact of global factors on emerging and developing economies. The objective of this research is to determine how the global economy’s output and liquidity affect India’s economic growth. The period of the study chosen is from 2000 to 2019 (quarterly). The empirical findings from the application of the NARDL approach suggest that the increase in global economic output increases domestic growth. Domestic economic growth is boosted by rising global liquidity, but both falling global liquidity and falling global economic production have no statistically significant results.JEL Codes: B22, C32, F21, F36, F43
Using a matched sample of foreign and domestic IPO firm listings on US stock exchanges, we find that foreign IPO firms are associated with significantly higher upward earnings management via discretionary (abnormal) long-term accruals in the first 2 years post-IPO year, and lower long-run stock returns in the 3 years post-listing, compared to US domestic IPO firms. Our results also show that the lower long-run stock returns of foreign IPO firms are associated with their higher discretionary long-term accruals. We provide further evidence that institutional investors can mitigate lower long-run stock returns of foreign IPO firms compared with US domestic IPO firms.
We investigate how managers' evasiveness affects peer firms' stock returns. Managers' evasiveness is measured by the degree of managers' irrelevant answers and non-answers during earnings communication conferences. Our results show that peer firms' investors react negatively to managers' evasiveness. Moreover, we find that the spillover effects are stronger for peer firms with lower information transparency, and the leading firms with a higher market power or a higher leverage ratio.
The Indian Economic Journal, Ahead of Print. India’s exports of electronics products underwent two major phases after 2000–2001. A boom phase from 2000–2001 to 2008–2009, where growth of Indian electronic exports increased significantly, and a bust phase from 2009–2010 to 2019–2020, with drastic decline in its growth. This gives us an opportunity to estimate and compare the factors that help firms to sustain exports in different phases of export growth. Using firm-level panel data and instrumental variable Tobit (IVTobit) model, this study shows that during the boom period, firms’ spending on research and development (R&D), imported technology and raw materials explain their exports. Firms’ age and multinational enterprises (MNEs) affiliation are also important for export in this phase. In the bust period, along with firms’ age, import of technology and raw materials, domestic raw materials, size, advertisement expenses and production efficiency of firms have emerged as important factors in determining export. These finding suggests that larger firms with high technical efficiency manage to export even during the bust period. Moreover, to export during the bust period, firms need to spend on domestic raw material, import of technologies and promotion of their products rather than spending on R&D activities.JEL Codes: F440, L6, L63, F140, L250, C240, C260
The Indian Economic Journal, Ahead of Print. The study examines the impact of climatic changes on the production of the major crops grown in India. The study estimates the panel data from 1970 to 2020 by using the Panel Autoregressive Distributed Lag technique. The results of the study show that in the long run, maximum temperature has a negative impact on crop production, whereas carbon dioxide emissions have a positive impact on crop production. In the short run, maximum temperature and average precipitation positively affect crop production, whereas minimum temperature negatively affects the production of crops. Besides climatic variables, the study also incorporates non-climatic variable such as the area under crop. The results revealed that the area under crop has a positive significant effect on crop production both in the short run and long run.JEL Codes: C50, Q1, Q15, Q54
The Indian Economic Journal, Ahead of Print. The exchange rate is one of the main components that represents the status of a country’s economic condition. This study mainly focuses on identifying an appropriate distribution that can capture the asymmetric behaviour of important currency exchange rates related to Sri Lanka. The true behaviour of the exchange rates of USD, EURO, JPY, AUD, GBP, CHF, SGD and CAD in terms of LKR was determined using flexible distributions of generalised lambda distribution (GLD), Normal Inverse Gaussian and Skew-Normal. The parameter estimation was carried out by maximum likelihood estimation (MLE), while for GLD, few more parameter estimation techniques were applied. To understand how well the fitted distributions identify the real behaviour of data, we conducted the goodness-of-fit (GOF) tests. The results from Cramer–Von Mises (CvM) and Anderson–Darling (AD) GOF tests pointed out that the exchange rates data follow a GLD with the parameter estimation of maximum product of spacings (MPS). Further, plots of histograms with theoretical densities, cumulative distribution functions (CDFs) with empirical CDF and Quantile–Quantile plots illustrated the same idea. This study presented the findings based on different suitable parameter estimation techniques and this study is the first investigation on the distribution identification of exchange rates in Sri Lanka.JEL Codes: C12,C13,G10
The Indian Economic Journal, Ahead of Print. Due to the growing importance of Bangladesh’s service economy and the country’s expanding industrial sector, strengthening the service sector has become a primary objective. Given the size and interconnectedness of the services sector with the rest of the economy, it is critical to understand how it affects other macroeconomic variables, most notably output growth. Our primary objective is to survey and analyse the service sector’s current state to ascertain its contribution to economic growth. This study undertakes this investigation using systematic econometric approaches and annual data from 1972 to 2021. Findings suggest that expanding the service industry in Bangladesh positively impacts the country’s per capita income (PCI) growth rate. Particularly, if the service sector growth increases by one percentage point, the growth of per capita real GDP will increase by 0.62 percentage points. The finding has important policy implications. Most importantly, government needs to enact policies to promote the service sector of the country in an effort to achieve economic prosperity.JEL Codes: L80, O11, O14
This study contributes to the discussion on the meaning and operation of the public interest. The all-inclusive perspective in defining the public interest adopted by IFAC, was criticised by stakeholders, predominantly professional bodies, for being broad and impractical. IFAC responded by proposing a process-oriented approach to simplify the definition and assessment of public interest policies and actions. The limitations in understanding the public interest from both conceptual and practical perspectives have not been addressed in a significant way, suggesting there is room for further guidance on the meaning of the public interest and how to implement it.
Our study investigates whether credible commitment to corporate green behaviours influences corporate finance. Specifically, using the unique setting Green Manufacturing (GM) program in China, we examine whether and how green manufacturing certification (GMC) endorsed by the government could lead to an increase in firms' bank loan financing. We find that GMC increases bank loan financing, mainly through alleviation of banks' concerns of information risk and default risk potentially arising from environmental risk. Heterogeneity analyses show that the positive effect of GMC on bank loan financing is more pronounced for non-state-owned enterprises, firms in polluting industries, in less eco-friendly regions, and in Green Finance Pilot Program regions. Our findings suggest that the government plays an important role in discerning and endorsing corporate green behaviours, and thus directing banks' financial resource allocation decisions.
