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Working Papers | 2020

Social Enterprises and the Pursuit of Mission: Form Matters

Ankur Sarin and Sriram M S

Mission drift serves as an important parameter of success not only on its own right (Epstein and McFarlan 2011), but also because it shines light on the fundamental dilemma that social enterprises face between the pursuit of a solution to the social problem ("purpose") and financial sustainability of the organisation ('profit"). Without contradicting the legal and resource imperatives, we argue that the choice of organisational form for social enterprises is also a strategic one, and one that has implications for the success of the organisation and its vulnerability to mission drift.

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Working Papers | 2020

Fractional Differencing: (In)stability of Spectral Structure and Risk Measures of Financial Networks

Arnab Chakrabarti and Anindya S. Chakrabarti

Computation of spectral structure and risk measures from networks of multivariate financial time series data has been at the forefront of the statistical finance literature for a long time. A standard mode of analysis is to consider log returns from the equity price data, which is akin to taking first difference ($d = 1$) of the log of the price data. Sometimes authors have considered simple growth rates as well. Either way, the idea is to get rid of the nonstationarity induced by the {\\it unit root} of the data generating process. However, it has also been noted in the literature that often the individual time series might have a root which is more or less than unity in magnitude. Thus first differencing leads to under-differencing in many cases and over differencing in others.
In this paper, we study how correcting for the order of differencing leads to altered filtering and risk computation on inferred networks. In summary, our results are: (a) the filtering method with extreme information loss like minimum spanning tree as well as filtering with moderate information loss like triangulated maximally filtered graph are very susceptible to such d-corrections, (b) the spectral structure of the correlation matrix is quite stable although the d-corrected market mode almost always dominates the uncorrected (d = 1) market mode indicating under-estimation in the standard analysis, and (c) the PageRank-based risk measure constructed from Granger-causal networks shows an inverted U-shape evolution in the relationship between d-corrected and uncorrected return data over the period of analysis 1972-2018 for historical data of NASDAQ.

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Working Papers | 2020

'Too central to fail' firms in bi-layered financial networks: Evidence of linkages from the US corporate bond and stock markets

Abinash Mishra, Pranjal Srivastava, and Anindya S. Chakrabarti

Complex mutual dependencies of asset returns are recognized to contribute to systemic risk. A growing literature emphasizes that identification of vulnerable firms is a fundamental requirement for mitigating systemic risk in a given asset market. However, in reality, firms are generally active in multiple asset markets with potentially different degrees of vulnerabilities in different markets. Therefore, to assess combined risks of the firms, we need to know how systemic risk measures of firms are related across markets? In this paper, we answer this question by studying US firms that are active in both stock as well as corporate bond markets. The main results are twofold. One, firms that exhibit higher systemic risk in the stock market also tend to exhibit higher systemic risk in the bond market. Two, systemic risk within an asset category is related to firm size, indicating that `too-big-to-fail' firms also tend to be `too-central-to fail. Our results are robust with respect to choose of asset classes, maturity horizons, model selection, time length of the data as well as controlling for all major market level factors. These results have prominent policy implications for identification of vulnerabilities and targeted interventions in financial networks.

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Working Papers | 2020

Compensation for environmental damage: progressively casting a wider net, but what's the catch?

M.P. Ram Mohan and Els Reynaers Kini

The 2018 decision by the International Court of Justice (ICJ) in which it for the first time addressed compensation for environmental damage in the case Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua)-Compensation Owed by The Republic of Nicaragua to The Republic of Costa Rica ('Costa Rica case') serves as the perfect opportunity to take stock of where international environmental law stands in terms of liability and compensation for environmental damage. While keeping in mind the distinct features between State responsibility for wrongful acts, the international liability of States in the absence of wrongfulness and the civil liability of persons along with the secondary liability of States as addressed in international treaties (in Part II), this paper seeks to focus on the core elements which one could find at the center of a Venn diagram between these various liability regimes (in Part III), to know: how are international bodies as well as domestic courts, international treaties and national legislations, defining and interpreting environmental damage, and applying it in concrete cases where compensation for environmental damage is in order? What is the standard of care applicable to the no harm obligation-is it based on a fault-based regime, strict or even absolute liability? Which methodology does one apply to calculate environmental harm? Despite some of the progress made with regard to the theoretical aspects of environmental damage, this paper will also review how courts fill in the contours when assessing environmental damages, including their reliance on equity as well as punitive damages when deciding cases, and assess whether international and domestic courts sufficiently rely on independent experts and valuation methods to calculate natural resource damages. In Part IV we will more closely analyze how the weaknesses of the international regime for civil liability for oil pollution has triggered interesting and more robust domestic legislative responses, based on a brief analysis of the Deepwater Horizon oil spill in the United States and the Erika oil spill disaster in France. The red thread running through this paper is that there is a natural and mutual influence between international environmental law developments, be it soft law, treaties or Judgments by the ICJ, and domestic legislative or judicial responses and reasonings. We will be reviewing these various facets through the prism of the Costa Rica case and contrast some of the ICJ's approaches and conclusions vis-à-vis compensation for environmental damage with responses and methodologies adopted by domestic courts and national legislatures as well as international treaty regimes and international adjudicating bodies. In doing so, we will be able to better place the Costa Rica case in the context of contemporary environmental law developments and identify areas where the ICJ could have walked a more proactive judicial policy path (Part V).

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Working Papers | 2020

A comparable series of Tax Revenue Foregone

Reetika Khera and Anmol Somanchi

The estimate of tax revenue foregone by the government crashed in 2015-16 after steadily rising over the previous decade. This was, however, on account of substantive methodological revisions rendering the estimates incomparable across years. Reconstructing the series accounting for these revisions reveals that the crash entirely disappears. In absolute nominal terms, the tax revenues foregone have not increased and the share of direct revenues foregone (in the total) has increased. With significant changes to the overall tax architecture (e.g., the move from VAT to GST), it is unclear how useful the current method of calculating the tax revenue foregone series remains for an assessment of tax expenditures or latent fiscal space.

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Working Papers | 2020

Covid-19 Crisis, Pandemic Resilience and Linkages to Land: An Exposition

Pranab R. Choudhury, Ranjan K. Ghosh, and Sumita Sindhi

For a COVID-19 like pandemic, the Achilles heel is an unsuspecting villain-rapid and global land use changes. The way governments, businesses and communities see, relate to and use land, not only influences the outbreak but also determines their impact on humanity and development. Drawing upon empirical evidences from epidemiology and land governance, this article argues why the current situation implores the need to focus on the interaction between land use and global diseases. Apart from dwelling on causal links, we discuss the externalities that industrial, urban and rural development in India are poised to face because of the pandemic's potential impact on land, biodiversity and wildlife habitat, property rights and housing. We also underline reform options for policy and practice, that must be discussed and acted upon.

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Working Papers | 2020

Merger control for IRPs: Do acquisitions of distressed firms warrant competition scrutiny?

M.P. Ram Mohan and Vishakha Raj

In July 2019, the Competition Law Review Committee Report had recommended that Insolvency Resolution Plans (IRP) which result in combinations should be green-channelled. This would mean that IRP combinations would be automatically approved without any merger scrutiny. The theoretical basis of this recommendation is the 'failing firm defence' which allows parties to enter into mergers if they show that the exit of a firm from the market will be more harmful to competition than the merger. This paper assesses the advisability of green-channelling IRPs through the lens of competition law. It examines the IRPs which have been scrutinised by the CCI and examines whether they are treated differently from other mergers. We use the European Union as a point of comparison to describe how the failing firm defence is being implemented and to show that there can be anticompetitive effects to green-channelling IRPs without a full competition assessment. We conclude that while the failure of a firm is an important consideration when assessing mergers, it cannot be the sole determinant of their desirability.

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Working Papers | 2020

Strategies for solving wicked problems of true uncertainty: Tackling pandemics like Covid-19
(Version: April 13, 2020)

Ajeet N. Mathur

This paper has three objectives: first to locate Covid-19 as a 'wicked problem' characterized by 'true uncertainty' that challenges strategists and unrolls new research agenda; second, to examine the inter-disciplinary and multi-disciplinary dimensions of the endeavours to contain the pandemic that point to the need for new conversations beyond national boundaries; and thirdly to propose, based on interpretive pattern recognition methodologies, a five pronged approach for the immediate future after the lockdown. The study points to the need for further research on how epidemiological imperatives, disease burdens, economic adversities, civic community cohesions and political compulsions come together to resolve tensions between costs, efficiency and equity in formulating responses to emergencies.

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Working Papers | 2020

Further Estimations of the Likely Total Infections and Deaths Due to COVID19 in Select Countries (Version 2 dt. April 10, 2020)

Sebastian Morris

We had earlier estimated the likely cases and deaths over the course of the pandemic for a number of countries. This was an early attempt and gave somewhat tentative results. With some 7 more days of data being now available, better estimates are possible which we bring out in this paper. As in the previous paper we use a logistic model of cumulative cases and deaths, to estimate the zero growth level of cases and deaths. We also provide an upper bound to these estimates. The earlier estimates are further reinforced, and new estimates are made for a select set of countries where the growth rates in the numbers of cases, and in deaths have begun to decline. We also give estimates of the current growth rates in cases and deaths that these countries are likely to witness.
The study as before presumes that the spread of infection is one-stage logistic process, once significant numbers of infections have taken place. This may not be true of countries which witnessed low deaths and cases. In countries that have witnessed much spread and deaths relative to their populations and with more sustainable approaches to containment may not witness significantly more deaths than what has happened thus far. This would be the case of Iran, Italy. China and Korea too with their rather highly coordinated approach despite low spread of cases and low number of deaths relative to their population would along with Iran, Italy and Denmark and Turkey would most likely not see a secondary wave of infections.
Argentina and South Africa show very high growth rate in deaths even the increase in cases have slowed down considerable. Spain has stabilized its growth in deaths to nearly zero levels bit since the cases are continuing to grow at around 5.7% the death rates could again turn positive after a while. Germany and Indonesia show continuing rise in deaths and cases at moderately high rates. Japan, Malaysia, Brazil and Singapore show low to moderate death rates, but since the rise in cases continues to be between 5 and 8%, these low(Japan) moderate growth rate in deaths are likely to continue for a while before they fall to zero. France, Sweden Australia and Thailand would see continuing growth in cases at moderate rates even though the growth in deaths continue to be at high rates.
The US most notably shows very high growth rates in both deaths and in cases indicating that the deaths at high rates are likely to continue for a while.
While estimates are made for Canada, India, Bangladesh, Russia, Mexico, UK and the Philippines, they are of limited value since it is too early for the logistic model to fit. However, all of these except Russia show high death rates and high case rates. These countries could all see continuing rise in cases before the decline in rates happen, so that their current decline in death rates even when statistically significant could change for the worse. We have as in the previous paper used a logistic model to estimate the current growth rates, and made forecasts of the ultimate stable cases and deaths before these stop rising any further. For 26 countries (with a combined population of 3.8 billion) the total cases as on date 9th /10th April was where the logistic trend has been realized for cases, was 1.36 million. We expect the cases to rise to a maximum in the countries covered to 2.9 million.
The death trends in only 22 of the 29 countries considered had stabilized to a logistic model. In these 22 countries (with a combined population of 3.7billion) the deaths as on date were 87,472. These would surely rise to between 121,000 to 355,000 before stabilizing.
In the estimates above India most notably has not been included, since its trends have not yet stablised to a logistic unfoldment. At present it is engaged in a titanic struggle through near complete lock downs to restrict the cases and deaths to low levels. Whether this would work to quell the spread to very levels, or whether the problem explodes later is still an open question.

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Working Papers | 2020

A Quick Estimate the Likely Total Infections and Deaths Due to COVID19 in Select Countries (Version April 1, 2020)

Sebastian Morris

Using a logistic model of cumulative cases and deaths it would soon become possible to give estimates to the final numbers of cases and deaths that are likely on account of COID19, for countries which have gone through about 60+ days since the first cases were recorded. Such estimates assume that the containment and preventive actions continue unabated. We also provide an upper bound to the final cases and deaths that are likely. Right now (with data up to April 1) the projections for Korea, China, Germany, Italy, Spain, Iran, UK have been made. We hope to update the same in due course as the disease progresses. In the UK the deaths are bound to increase, and in Italy the cases could rise further.

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