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Working Papers | 2016

Executive Stock Options: Will It Work as a Good Governance Mechanism in all Scenarios?

Preet Deep Singh and Chitra Singla

Agency theory proposes different mechanisms to mitigate agency costs in the firms. An executive stock options (ESoPs) is one of such mechanism, which is given to the CEO of the firm to align CEO's goals with that of the owners. In this paper, we contend that ESoPs will not work as a good governance or mitigation mechanism in all types of firms. ESoPs can be an effective mitigation mechanism for a firm with dispersed ownership but it might not be the case for a firm with majority or block shareholding. We extend this argument for ESoPs given to board members as well. We present a framework to understand when it makes sense for a firm to incentivise top management with ESoPs.

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Working Papers | 2016

Empathetic climate resilient frugal innovations for sustainable communities

Anamika Dey and Anil K. Gupta

Dealing with risk and uncertainty has contributed to the evolution of local knowledge, institutions and culture among farming, pastoral and artisanal communities at grassroots level. The traditional institutions, practices and ways of finding contemporary innovative solutions to emerging problems still remain relevant even if some of the indicators or specific practices may have lost their relevance (Leonard, Sonia, et al , 2013, Corinne Valdivia, D. Green and G. Raygorodetsky, 2010 , Coleen Vogel et. Al., 2007 ). Institutional adaptation plays no less important a role through collective action (Daivi Rodima-Taylor, Mette F. Olwig, Netra Chhetri, 2012, also see www.sristi.org/cpri). The resilience requires not just actor based study but also the role of entire socio-ecological system (Gupta, 1984, Donald R. Nelson, W. Neil Adger,and Katrina Brown, 2007) This paper focuses more on technological adaptation and innovation (Gupta, 1992,1995, 1989, 2006, 2012). The grassroots innovations emerging in a materially constrained environment invariably leverage knowledge, ingenuity and local resources in a very frugal and empathetic manner.
In part one, creative and innovative coping strategies of knowledge rich-economically poor people are summarized. Part Two deals with the contours of emergent inclusive innovative ecosystem in India over the last 25 years of Honey Bee Network. Part three lists emerging inclusive models of innovations having bearing on creativity at the grassroots level. Trends in innovation literature, particularly from an open innovation perspective are reviewed in part four followed by a summary of key points at the end.

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Working Papers | 2016

Impact of Ownership Structure on Agency Cost of Debt in India

Sakina Tohid Kachwala and Chitra Singla

Using data from Indian listed companies from 2000 to 2014, the relationship between the ownership structure of the firm and the agency cost of debt in the context of an emerging economy is being explored in this paper. We mainly look at family ownership. Family owners and debt holders share similar risk profile and long term orientation towards firms and therefore, expected to have goal alignment between them. However, we hypothesize that debt-holders, in the Indian context, are more concerned with the risk of wealth expropriation by the concentrated family owners rather than the benefits entailed by such an ownership structure. Accordingly, the paper attempts to answer the question: which agency problem namely the management-principal or the principal-principal is given more significance by the debt holders in the Indian context

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Working Papers | 2016

Dedicated High Speed Rail Network in India: Issues in Development

G. Raghuram and Prashanth D. Udayakumar

India and Japan have signed a memorandum of understanding to set up a high speed rail (HSR) network costing INR 976.36 billion, between Mumbai and Ahmedabad. As of now, the top speed in India is 150 kmph, and that too for a few special trains in limited segments of their run. The Ministry of Railways first proposed HSR in 2007-08 and have conducted pre-feasibility studies on various routes in the country.
While documenting the progress of proposed HSR routes for India, the paper also draws lessons from international HSR experience in Europe and Asia. For the development of HSR network in India, there are a variety of issues. This paper examines issues with regards to route fixation, choice of technology partner and need for standards, location of stations, choice of grade level, choice of gauge and interoperability of trains beyond core networks, and pricing, revenues and funding.

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Working Papers | 2016

Incorporating gender and age in genetic algorithms to solve the indexing problem

Diptesh Ghosh

In this paper we propose new genetic algorithms for the tool indexing problem. Genetic
algorithms are said to be nature-inspired, in that they are modeled after the natural process of
genetic evolution. The evolution process that they model is asexual in which individuals can
potentially live forever. In this paper, we propose a genetic algorithm in which solutions are of
two genders, reproduction happens by a combination of solutions with dierent genders, and
each solution has a nite life. We compare our genetic algorithms with the best known genetic
algorithm for the tool indexing problem and report our computational experience.
Keywords: Genetic algorithm, permutation problem, crossover, mutation

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Working Papers | 2016

Ownership Structure and Internationalization of Indian Firms

Chitra Singla, Rejie George, and Rajaram Veliyath

This paper examines the relationship between ownership structure and the firm internationalization, in a longitudinal sample of Indian firms. Drawing from principal-principal (PP) agency theory and the resource-based view (RBV) of the firm, we argue that divergent motivations among the firm's owners affect the firm's inclination to pursue internationalization, while resource heterogeneity among the firm's owners affects the firm's capability to pursue internationalization. Since both motivation and capability are required for a firm to pursue any strategic initiative, we argue that differences in ownership, which influences both the motivation and the capability of firms, impact firm's internationalization strategies in different ways. In addition, through examining two modes of internationalization, i.e., outward foreign direct investment (FDI) and exports from a prominent emerging economy, we uncover an interesting dichotomy. While family and other domestic owners favor exports (and not FDI), foreign owners favor both exports and FDI. Further, we find that family owners have a dominant influence on internationalization and their preferences appear to supersede those of the other owners.

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Working Papers | 2016

Impact of Board and CEO characteristics on Firms' Performance

Chitra Singla

Corporate governance characteristics like board composition and leadership impact a firm's performance. Researchers have attempted to explain the relationship using different theoretical perspectives like agency theory, resource dependence theory, and stewardship theory. However, the literature presents ambiguous results where some empirical findings support negative impact and other support positive impact. In this paper, we argue that ambiguity in results could be due to the context specificity of the nature of this relationship. In some contexts, agency theory might be more valid than other theories and in others stewardship theory or resource dependence theory might be more valid. Building on this context specificity, we look at the relationship between board and CEO characteristics on firm's performance in a longitudinal sample of Indian firms. Our findings suggest that none of the above mentioned theories are completely valid in the India context because we get mixed support for these theories. This calls for a mid-range theory to explain the relationship between corporate governance characteristics and firm's performance.

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Working Papers | 2016

Understanding Coefficient Alpha: Assumptions and Interpretations

Dheeraj Sharma

A procedure is developed for determining appropriate levels of scale reliability by examining coefficient alpha in conjunction with the standardized regression coefficient for each variable. Present study aims to examine the effect of addition and deletion of items on coefficient alpha. Also, necessary assumptions for appropriate interpretation of coefficient alpha are examined. Present research suggests that deleting scale items to increase coefficient alpha may result in an under specification of the construct the scale attempts to measure. Furthermore, this research offers prescriptive and descriptive insights for appropriate use of coefficient alpha.

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Working Papers | 2016

Trends in Strategies and Performance of the Indian Corporate Sector
What has changed in two decades of economic reforms?

Rakesh Basant and Pulak Mishra

In the context of various policy initiatives made during the last two decades to reform the Indian economy in general and corporate sector in particular, this paper documents strategies followed by firms in this period and the resultant changes in business conditions. We find that although the rate of growth of the industry sector has not accelerated following economic reforms probably due to slow growth in agriculture and industrial productivity, investment in general and FDI in particular have shown considerable increase. Increase in competitive pressures seems to have resulted in firms adopting a variety of strategies. While reliance on mergers and acquisitions (M&As) has increased to restructure business and grow, the role of embodied technology purchase has declined in relative terms with firms depending somewhat more on in-house R&D, disembodied technology purchase and FDI linked technology inflows. There are some signs of a growing domestic technology market as well. Although strategies of building marketing and distribution related complementary assets continue to be important for implementing the strategy of product differentiation, their role seems to have declined in a relative sense as these expenses as a proportion of sales show a declining trend. The emerging competitive pressures have significantly raised the importance of sub-contracting/outsourcing in manufacturing possibly as an alternative to the strategy of vertical integration, a measure of in-house value addition. While cost-efficiencies do not show improvements, export orientation has increased significantly across industries and import penetration has seen a marginal decline. Overall, the observed trends of corporate response to economic reforms are interesting, but one needs to systematically explore how M&As led consolidation and flows of FDI are linked to the adoption of various non-price strategies relating to technology and product differentiation. As economic reforms deepen and competitive pressures build up, an analysis of these interactions would provide useful insights for understanding corporate behaviour and for making policy choices.

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Working Papers | 2016

Impact of Independent Directors' Resignations on Firm's Governance

Preet Deep Singh and Chitra Singla

Directors are liable for any act of omission or commission. They have a reputation to protect. While Independent directors might engage in passive monitoring; when apprised of a decision where the probability of detection of negligence is higher, they might prefer to abandon ship rather than suffer consequences. Under such circumstances, directors' resignations could lead to some consequences on firm's governance. We test this using a sample of more than 2300 resignations during 2006-2014 from firms listed on National Stock Exchange, India. We specifically identify clustered resignations, i.e., when 2 or more people leave the board within the same year for company-specific reasons and see its association with earnings management in the following year.

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