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2758 items in total found

Working Papers | 2001

Corporate Dividend Policy and Behaviour: The Malaysian Evidence

Pandey I M

This study examines corporate dividend policy and behaviour of the Kuala Lumpur Stock Exchange (KLSE) companies. Our results confirm the influence of industry on payout ratios. We also find that payout ratios in a given industrial sector vary significantly across time. The results of multinomial logit analysis reveal that the KLSE companies' dividend actions are sensitive to the changes in earnings. Probabilities of dividend increases, decreases and omissions are high, respectively, with earnings increases, decreases and losses. This causes volatility in dividend payments. The KLSE firms appear reluctant to omit dividend except when they suffer losses. Further, using Lintner's framework and panel regression methodology, we find evidence in favour of regular, but less stable, dividend policies being pursued by the KLSE companies. This is contrary to the experiences of companies in the developed capital markets. The results of the two-way fixed firm and time effects model reveal that there are significant differences in dividend policies across individual firms and time.

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Working Papers | 2001

Public Private Partnership in Airport Development - Governance and Risk Management Implications from Cochin International Airport Ltd.

G. Raghuram and Biju Varkkey

In India, airports were totally owned and managed by central government or the armed forces. The Airport Authority of India (AAI), a body functioning under the Ministry of Civil Aviation was responsible for managing the airports in India. In 2000, there were 117 usable airports (including 26 civilian enclaves maintained by the military) in India, which according to ICAO (International Civil Aviation Organisation) was more than China, which had 76 airports. Out of these, scheduled commercial operations were made only to 61 airports. According to projections, Indian air passenger traffic was estimated to grow to 100 million passengers by 2012 from 36.98 million in 1998-99. Growth projections in the cargo front were also promising. The draft policy on Airport Infrastructure of December 1997 acknowledged the importance of developing airport infrastructure in the country. Airport infrastructure was linked to development of India international competitiveness and her ability to attract foreign investments. The policy opened the doors of private investment in this sector, including investments from foreign airport authorities. Cochin International Airport Limited (CIAL) was the first airport in India to be built in the joint sector with public - private participation. The airport users and other benefactors, mainly non-resident Indians, the general public, government of Kerala (GOK) and the airport service providers came together to build an airport of international standards. The new Cochin airport project was an alternative to the existing civil enclave in the naval airport, which was not capable of handling larger aircraft due to runway limitations. The development of this airport took place initially irrespective of the policy on airport infrastructure. Some of the parameters of this policy evolved as a result of CIAL. The cost of expanding the existing airport was almost equal to the cost of constructing a new airport. Further, it was considered near to impossible to obtain budgetary support form Government of India (GOI) for expanding the existing airport. The involvement of users was a pioneering concept of this project, which was conceived even while a definite policy on private participation in airport infrastructure was not in place. The process of project and financial structuring, project management including land acquisition and resource mobilization, dealing with regulatory bodies and managing early operations in the context of CIAL offers a rich learning experience for governance in developing successful infrastructure projects. This paper begins with the case study of CIAL, from which implications for governance and risk management are examined. The significant governance issues are land acquisition, rehabilitation and resettlement of project affected people, project development ensuring viability of airports and staffing. The key areas of risk management are political risk, revenue risk, operating risk and regulatory risk.

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Working Papers | 2001

Capital Structure and the Firm Characteristics: Evidence from an Emerging Market

Pandey I M

We examine the determinants of capital structure of Malaysian companies utilizing data from 1984 to 1999. We classify data into four sub-periods that correspond to different stages of Malaysian capital market. Debt is decomposed into three categories: short-term, long-term and total debt. Both book value and market value debt ratios are calculated. The results of pooled OLS regressions show that profitability, size, growth, risk and tangibility variables have significant influence on all types of debt. These results are normally consistent with the results of fixed effect estimation with the exception that risk variable loses its significance. Unlike the evidence from the developed markets, investment opportunity (market-to-book value ratio) has no significant impact on debt policy in the emerging market of Malaysia. Our results are generally robust to time periods, but the significance of some variables changes over time. Profitability has a persistent and consistent negative relationship with all types of debt ratios in all periods and under all estimation methods. This confirms the capital structure prediction of the pecking order theory in an emerging capital market.

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Working Papers | 2001

GATS and Educational Services: Issues for India Response in WTO Negotiations

Satish Y. Deodhar

Under the auspices of WTO, negotiations on liberalization of trade in services are expected to begin soon. One agenda at the negotiating table will be trade in educational services. Trade in educational services is too important an issue for India, and, a thorough homework needs to be done before we make any commitments at the negotiating table. In this context, the paper analyses the intricacies of the General Agreement on Trade in Services (GATS) as applicable to educational sector. The need for trade, and the likely competitiveness of India educational services is also discussed. Finally, suggestions for trade negotiations and domestic reforms are presented.

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Working Papers | 2001

Societal Change, States and Governance: Insights from History and other Societies

Sebastian Morris

The nature of governance has differed widely across societies, and what is more interesting, within any particular society depending upon the stage of development. Governance is better defined in functional rather than in value terms. Functional governance aids and abetts industrialisation. Industrialisation is the one change that all societies have to necessarily strive for. Without it no development is possible In contemporary societies which are also democratic and trying hard to industrialise, that insight needs to be tempered with the limitations of the state that is a coalition of many classes. More importantly just because functional governance was not the good governance of today, in many countries and societies in the past, does not mean, that it today cannot be both good and functional. The point though is that unless it is functional it can never be good. Functionality of governance is best assured when the policies followed by the state in its drive to industrialise the economy are correct. Therefore the main lesson from history is that the first thing to do (for both functional governance and for the industrial transformation) is to bring about the initial conditions necessary for the industrialisation of the economy. The key bottleneck here is tenurial relations in land which stand in the way of output increases from the poor farmer. The egalitarian income distribution that land reform brings, ensures that nearly all the poor are particpants in the market. All other conditions necessary for the unambigous transformation already obtain today in India. We also describe the process of change and the sense in which the economic is primary to societal change. That does not mean that there is no scope for individual or collective action. It only means that there are particular ways in which individuals and small groups including reformers can bring about change. It is important to recognise the specific ways in which small groups including elements with government can bring about change. In any discussion of corruption and governance the case of China which despite being highly corrupt society grows can hardly be avoided. Corruption there is the means by which a bourgeois society is being born in China today. Because much of the rents are invested there is no dysfunctionality to this corruption. It would though soon become dysfunctional, since, once the party elite have all become capitalists, the gain to them and to society as a whole is greater in a non-corrupt society. That is already happening, and corruption can be expected to decline soon.

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Working Papers | 2001

The Challenge of Governance of India Today

Sebastian Morris

This paper attempts to delineate the possible role of goverance oriented reform in India today. We raise conceptual and historical difficulties with the notion that sees governance failure as the cause of poor economic performance. We discuss why there are certain regularities in the occurance of good governance, distinguishing the same from functional governance which aids and abets industrialisation. Next we go on to discuss the interlikages between institutions, economic development and governance in India, and why internal attempts at reform thus far have failed.. Finally we bring out the current failures in governance that are actionable and suggest that they are largely corrected by changes in economic policy and some intitutional initiatives. Attention to governance as such is warranted only to build organisations and initiatives for commercialisation and privatisation, and for appropriate changes in the law and in the development of frameworks for regulation and contracting out.

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Working Papers | 2001

Regulatory Implications of Monopolies in the Securities Industry

Jayanth R. Varma

Since the mid-1990s, investors and regulators have benefited from a high degree of competition in the Indian securities industry. Even more than all the policy changes that have taken place, it is technology and competition that have transformed the Indian capital market in the last 7-8 years. This paper shows that there is now considerable evidence that critical elements of the Indian securities industry are becoming significantly less competitive than in the past. Reduced competition would remove the single most important driver of capital market modernisation in this country and would create several serious regulatory problems. The paper argues that rather than applying the traditional solution of "regulated monopolies", regulators need to adopt strong measures to stimulate competition. The regulator must also ruthlessly discard those elements of the regulatory regime that are anti-competitive in nature.

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Working Papers | 2001

Quality Attributes and Hedonic Price Analysis of Ghee

Intodia Vijay and Satish Y. Deodhar

In the post-WTO scenario processed food industry is witnessing intra-industry trade, i.e., trade in similar products. It also means that there will be intense competition between foreign and Indian companies in the domestic market. This competition will compel companies to focus their attention on product differentiation and branding. This is possible if companies prepare themselves to be quality competitive. In order to be quality competitive, firms have to understand consumers perception and valuation of various quality attributes. Hedonic price analysis, a methodology used for this purpose, is extensively used for processed food products in developed countries. However, it has not been applied to Indian food markets. We conduct a hedonic price analysis of a typical Indian processed food product - ghee. Results indicate that consumers are willing to pay a premium for branded over non-branded ghee, and, for corporate brands over cooperative brands. Flavour is an important quality attribute valued by consumers. While texture is not that important, an agreement needs to be developed on whether or not there is an ideal colour attribute for ghee. The results imply that branding generates reputation, and, cooperatives may want to enhance their brand equity. Firms may do well in improving flavour to enhance ghee quality. Another implication is that large firms and other organizations need to generate data on measurements of food quality attributes so that hedonic price analysis can be effectively used for strategic food quality management.

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Working Papers | 2001

Relative Effectiveness of Signals in IPOs in Indian Capital Markets

Kumar G Arun and Ajay Pandey

IPO by a firm calls for assessment of potential agency problems and associated costs by the outside investors. The potential conflict of interest problems between insiders and outsiders could be very high in countries with weak corporate governance mechanisms like India. Theoretically it could be argued that there are quite a few signals related to the firms in the IPO context and available to the investors, which could be used by them to assess the quality of firms. Based on cross-sectional data of 1243 IPOs in Indian markets during 1993-95 period, we find that the under-pricing (or realized excess returns), inside equity and pre-public offer firm reservations made for institutions and mutual funds explain the extent of oversubscription across IPOs. The type of agency appraising the project and presence or absence of foreign financial and/or technical collaborators fail to explain the extent of oversubscription across IPOs. In addition, we find that subscription rate rather than realized initial returns as dependent variable sheds more light on the effect of signals in a fixed-price open offer IPO process characterized by listing with considerable lag.

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Working Papers | 2001

Financial Goals Choices and Performance of Firms in Malaysia

Pandey I M

The objectives of the study are (a) to ascertain the financial goals pursued by companies in Malaysia and (b) to find out the relationship between firms financial performance and stated financial goals. Data on the financial goals are collected from 41 KLSE listed firms through a questionnaire. An analysis of the relationship between the financial goals pursued by these firms and their actual performance is conducted using dummy variables for financial goals. The results of the questionnaire analysis are: (a) Firms in Malaysia follow multiple financial goals. (b) A very few firms consider maximization of market value per share as their primary goal in the financial decision-making. (c) From the overall rank ordering of the financial goals, the following four goals could be isolated as more important in practice: (i) maximization of operating profit before interest and taxes (PBIT); (ii) maximizing the rate of return on equity (ROE); (iii) maximizing the growth rate in earnings per share (EPS); and (iv) ensuring that funds are available. The cross section study of the selected sample companies reveals that the pursuit of the goal of maximizing PBIT is positively related to the accounting-based financial performance. However, pursuing the goal of maximizing ROE has no relationship with the actual performance measured by ROE, and it has a negative relationship with the financial performance measure of ROA. The financial goals pursued by firms in Malaysia have no relation with market-to-book value as a measure of performance.

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