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Working Papers | 1992

Survey of Strengths and Weaknesses of Senior Executives as Perceived by them and their Juniors

T. V. Rao and Selvan Tamil S

Survey of strengths and weaknesses of senior executives was undertaken in the context of increased use of self-awareness and personal growth programmes in through feedback and counselling. Survey had the objectives of finding out (i) Characteristics or qualities that are perceived by Indian managers as contributing to their effectiveness, (ii) Characteristics or qualities that are perceived as hindering the effectiveness of Indian managers; (iii)Most frequently mentioned strengths of Indian managers as perceived by their subordinates; (iv) Most frequently mentioned weaknesses of Indian managers as perceived by their subordinates and (v) Qualities or characteristics in which there is good degree of agreement in the perceptions of the subordinates. Various characteristics that contribute managerial effectiveness were grouped under six categories: 1. Technical or technological competencies; 2. Managerial and systems competencies; 3. Human relations competencies; 4. Group/team building competencies; 5. Leadership competencies; and 6. Other personal characteristics. It was found that senior executives frequently mentioned managerial and human relations competencies (out of the six said above) as the qualities contributing to managerial effectiveness. Also, of the six categories, personal characteristics and human relations competencies have been identified by the managers as hindrances to effectiveness. Thus we find personal qualities and interpersonal competencies playing a greater role in making a manager to perform effectively. Subordinates have perceived the strengths of their bosses and have stated that their bosses are technically knowledgeable, have planning and decision making skills, delegation ability, communication and motivation skills, leaderships, commitment, hard work and posses other personal characteristics like cool headedness and sincerity. There was agreement in perception relating to strengths like technical knowledge, hardwork, aggressive and cool headedness. In their perception of weaknesses of their bosses, subordinates have identified, poor communication abilities, poor delegation, inability to motivate subordinates and poor planning as some of the weaknesses. There was consistency in the cases of weak in communication, short temperedness and low involvement or aloofness. Subordinates have felt that, improving interpersonal relationship, communication and time management would further enhance the effectiveness of their bosses. Thus, we are able to see a consistency in the case of human relations competency, a competency which both managers as well as subordinates feel is very important for improving managerial effectiveness. As a whole, the study brings out the relevance of personal development and human relations skill to management.

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Working Papers | 1991

Is the BSE Sensitive Index Better than the National Index?

Jayanth R. Varma

Stock price indices are used extensively by investors, brokers and portfolio managers as a general indicator of the stock market conditions. They are also used extensively in finance theory notably in operationalizing the popular Capital Asset Pricing Model (CAPM). In recent years, the indices published by the Bombay Stock Exchange (BSE) - the Sensitive Index (Sensex) of 30 scrips in Bombay and the 100 share National Index (Natex) - have become extremely popular with academics and practitioners alike. Anecdotal evidence suggests that the Sensex is by far the more popular index among brokers and lay investors while the Natex is the index of choice among mutual funds, professional investors, foreign investment agencies and academics. This paper studies the two BSE indices and their inter-relationship. The analysis in this paper indicates: 1. The Natex is a sluggish index which responds too slowly to market conditions. Changes which are reflected in the Sensex on any day are completely reflected in the Natex only by the next day. 2 Sensex is more volatile than Natex, but this difference is accounted for by two factors - (a) the autocorrelation of the Natex which conceals the true volatility of Natex, and (b) a higher beta of Sensex relative to Sensex. Therefore, the excess volatility of Sensex is not a matter of serious concern. In many applications, however, the higher beta of Sensex is worrisome, but it is easy to correct for it. The conclusion, therefore, is that those who follow the Natex because of its greater comprehensiveness and theoretical appeal may be mistaken. The Sensex needs to be taken more seriously as a sound market index. The observed deficiencies of the Natex raise several disturbing questions for finance theorists and researchers. Is the market for the less well traded securities in the market inefficient? Do the scrips constituting the Sensex lead the other scrips? If so, can this relationship be used to make extra normal returns? Does the Bombay market lead other exchanges which are also represented in the Natex? These issues call for further research.

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Working Papers | 1991

A Test for Strategic Planning Related to Management

Das P, Misra Sasi B, and Mishra Rama K

Ability to find parsimonious solutions to problems, make good judgments and decision relate to intelligent functioning of human. These are particularly significant functions of managerial work. However, standard intelligence tests and aptitudes tests of one sort or another predominantly measure the ability to code information, to store it, and retrieve it when necessary. Whereas these abilities are necessary for academic and scholastic success, what counts outside the scholastic environment of classrooms is the former (i.e. ability to make decisions etc.). This, in essence, is called “planning”. The research reported here includes the development of a test of “planning” that is contextually relevant for management and examines its psychometric properties.

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Working Papers | 1991

Indian Convertible Bonds with Unspecified Terms: An Empirical Study

Samir K. Barua, T. Madhavan, and Jayanth R. Varma

Indian convertible bonds have two peculiar features that make them possibly unique in the world: a) the bonds are compulsorily converted into equity without any option, and b) the conversion terms are not specified at the time of issue but are left to be determined subsequently by the Controller of Capital Issues (CCI) who is the government functionary regulating capital issues in India. A naive model would say that the market simply forms an estimate of the likely conversion terms and then values the bond as if these terms were prespecified. This paper examines the market prices of one of the largest issues of Indian convertible bonds with unspecified terms. The empirical investigation convincingly rejects the naive model and demonstrates that changes in the markets expectation of the conversion terms are a significant factor affecting the pricing relationship. These changes are significantly correlated with the stock price itself. We do not, however, find any evidence that the market expects the CCI to adjust the conversion terms on the basis of the actual market price to protect the bondholder. But, there is strong evidence that changes in expected conversion terms affect the share price through the dilution effect. Since the unspecified terms have only added to the uncertainty of the bondholders without giving them any perceived benefits we recommend that this system should be abolished. In a companion paper, Barua and Varma (1991) present a theoretical valuation model for the Indian convertible bonds with unspecified terms. The empirical results in this paper confirm the predictions of that model.

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Working Papers | 1991

Indian Convertible Bonds with Unspecified Terms: A Valuation Model

Samir K. Barua and Jayanth R. Varma

Indian convertible bonds have two peculiar features that make them possibly unique in the world: a) the bonds are compulsorily converted into equity without any option, and b) the conversion terms are not specified at the time of issue but are left to be determined subsequently by the Controller of Capital Issues (CCI) who is the government functionary regulating capital issues in India. An naïve model would say that the market simply forms and estimate of the likely conversion terms and then values the bond as if these terms were prespecified. However, the empirical investigation reported in a companion paper, Barua, Madhavan and Varma (1991) convincingly rejects the naïve model and makes a more sophisticated model necessary. In this paper, we use the general theory of derivative securities (Cox, Ingersoll and Ross, 1985) to obtain a closed form expression for the value of the Indian convertible bond. The testable implications derived from our model are in sharp contrast to those of the naïve model and are consistent with the empirical results in Barua, Madhavan and Varma (1991). Though the valuation formula contains an unobservable state variable, the crucial functional parameters of the pricing relationship can be estimated, allowing the investor to measure and manage his risk. We derive the hedge ratios which an investor needs to control his risk exposure. An investor in Indian convertibles cannot, however, protect himself from both sources of risk (firm value risk and conversion ratio risk) with a single hedge ratio. This is an important difference between the Indian convertible and the ordinary convertible bond.

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Working Papers | 1991

Quasi-Social Products with Legal Implications: A Case of Insurance Marketing

Durgaprasad D and Moorthy Ravi C

Developing countries are characterised by an under informed public and low understanding of action-outcome relationships. As a result the society as a whole ends up sub optimising its welfare. In such an environment marketing of specific products/services takes on a special significance, i.e., it needs to have a developmental content. In the case of products with a legal content and of a quasi social nature, such as insurance, changing the existing 'mindset' of the target consumer may require unconventional organisational responses. The following case and notes attempt to illustrate on such instance in the Indian environment.

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Working Papers | 1991

Distributive Justice with Externalities and Public Goods

Lahiri Somdeb

We analyze in this paper the distribution of a fixed amount of perfectly devisable private goods among a fixed number of agents and with a certain portion of the private goods allocated for the creation of public goods. Each agent's preferences exhibit a type of consumption externality made precise in the paper, and we focus our attention on the existence of efficient and egalitarian allocations of the goods.

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Working Papers | 1991

Role of Futures Trading in Facilitating Commodity Exports

Naik Gopal and Aneja Ajay

In India, since its beginning in 1921 futures trading has been subjected to frequent intervention by the government in terms of allowing, banning and restricting its operation. As the debate on their utility for the economy as a whole, especially in terms of price stabilization, continues, the government is hesitant to encourage futures trading. The usefulness of futures markets are being reexamined in the light of its positive effects on international trade. Futures market seems to help exporters by way of reducing the risk of dishonor of contracts in the domestic market, reducing transaction cost due to liquidity and standardization, better market information and so on. However, unless the exporters are assured that in the long run they do not incur losses by participating in the futures market, they will not participate in the trading on price stabilization should not be negative. This study examined the issues of exporters' profitability from trading in castor seed futures and price stabilization effect to assess whether futures trading should be encouraged for enhancing exports. The results indicate that the castor oil exporters would not have incurred losses if they had consistently participated in the futures market. In fact they would have benefited by following certain trading strategies. The price stabilization test results also indicated that price stabilization effect is stronger than the destabilization effect. This is more so during high price years. These results indicate that futures trading can be beneficially used for export promotion.

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Working Papers | 1991

Spatial Optimisation of the Fuel Purchase Decision for Road Transport Undertakings

G. Raghuram

Road Transport Undertakings in India have been spending approximately between 15-20% of their total expenses on fuel. Given the fact that they visit different towns and sometimes even different states, the fuel which is available at different prices could be purchased in a way that the fuel cost is optimised. A network model, algorithms and linear programming formulations are presented for this problem in order to decide how much fuel should be purchased at the different towns that a bus visits as part of its vehicle duty schedule. The model presented minimises the fuel costs for a given amount of fuel to be consumed, taking advantage of spatial price differences.

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Working Papers | 1991

Dispatch Planning of Finished Steel: A Case Study in Modeling and Data Analysis

Kalro A H, G. Raghuram, P. R. Shukla, and Tripathy Arabinda

A steel plant has to dispatch products to forty four stockyards from a range of over hundred stock keeping units. The railways, who transport the steel, would like the steel plant to move the steel in a rake load since it is operationally beneficial. On the other hand, the steel plant prefers to move the steel with a shipment size as small as a wagon load. This paper attempts an analysis for the desirable shipment size between the rake load and the wagon load. This is done by first evaluating the requirements of the average finished goods inventory as a function of the percentage of dispatch by rake load, using a simulation model. A national perspective is then used for this decision since the railways are a crucial national resource. Having concluded that the rake load is the desirable shipment size, a decision support system is developed for the loading and production expected in the short term, take load (shipment size) requirements for various destinations, the rake formation constraints at the loading points etc. the paper also proposes longer term strategies to help increase the rake load dispatches.

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