High Capital Mobility and Precautionary Demand for International Reserves

The volatility of reserve increment and the opportunity cost of holding reserves play prime role in models of optimal demand for foreign reserves. Most empirical studies find significant rise in the response of reserve demand to volatility during the era of high capital mobility. In contrast, we find that volatility measured as rolling standard deviation of reserve increment provides upwardly biased estimates whereas conditional volatility derived from GARCH models eliminates such bias and provides elasticity estimate closer to the prediction of buffer stock model (0.5). Though the time varying elasticity estimates derived from Kaiman filter exhibit a sharp rise during crises period, it does not exceed theoretical prediction. The RBI’s intervention policy seems to be asymmetric; leaning with wind when rupee depreciates and leaning against wind when rupee appreciates. This evidence seems to indicate that the policy of exchange rate stability had an in-built objective of providing a competitive edge to exporters.

     

Spillover Effects of Real and Nominal Uncertainties in India

This paper examines the spillover effects and the causality between inflation, output growth and its uncertainties for India. Using monthly data for the period from April 1980 to April 2011, we estimated a bi-variate GARCH in mean with BEKK representations. This study differs from the earlier works where the parameters in the BEKK representations are estimated individually and the inferences are drawn on the basis of the individual lagged variance, covariance, and error terms from the respective equations. The empirical evidence suggests that inflation uncertainty seems to have significant negative impact on output growth and positive impact on output uncertainty and there is a positive influence of output uncertainty on the inflation. More importantly, there are spillovers and volatility transmission effects between the macroeconomic uncertainties where the volatility in output growth is significantly influenced by the shocks and volatility in inflation.

     

Building the BoP Producer Ecosystem: The Evolving Engagement of Fabindia with Indian Handloom Artisans

Recent research on the base of the pyramid (BoP) has called on firms to initiate market‐driven interventions directed at the BoP population with the objective of identifying and pursuing mutually profitable means of attaining meaningful poverty alleviation outcomes. In response, firms as well as scholars have engaged at length with the creation of new products and services for the BoP consumer but paid far less attention to the BoP producer—a member of the BoP population who creates value by producing goods and services for sale in nonlocal markets. Additionally, extant studies have largely focused on snapshot views of BoP interventions by firms, thereby limiting our understanding of the emergence of meaningful poverty‐alleviating outcomes over time from these interventions. This paper seeks to redirect attention toward the dynamic of the long‐term engagement between the firm and the BoP producer. Using rich qualitative data from Fabindia—an Indian handloom retailer—this paper examines how the engagement between Fabindia and communities of handloom artisans in India has persisted over a period of five decades. We found that, even as it encountered changes in the external environment and pursued newer organizational goals, Fabindia repeatedly renewed its engagement with handloom artisans and facilitated progression in poverty‐alleviation outcomes. Building on the insights from the case study, this paper presents a process model that highlights the role of innovative management practices in sustaining engagements between firms and BoP producers over time. Additionally, this paper proposes the concept of the “bridging enterprise”—a business enterprise that originates at the intersection of specific BoP communities and the corresponding nonlocal markets—as an interpreter and innovator reconciling the interests of stakeholders across the pyramid.     

Stock exchange governance initiatives: Evidence from the Italian STARs

Can a stock exchange improve corporate governance and transparency by designating companies that exhibit superior corporate governance? In 2000, the Borsa Italiana created a mid-cap segment with strong listing standards, which is composed of firms (called STARS) that follow stricter standards of transparency, disclosure, monitoring and liquidity. We find that STAR firms exhibit governance characteristics not observed in non-STAR firms, such as a higher incidence of audit and executive committees and higher debt ratios. They experienced a modestly favorable share price response upon the implementation of the STAR initiative. Moreover, they experienced significantly higher buy and hold returns and transparency after the initiative. Several governance characteristics are cross-sectionally associated with performance following the STAR initiative. Overall, the results suggest that firms may be willing to improve governance when they are endorsed by a credible agency for doing so, and such improvements may lead to better performance. The STAR initiative may serve as a model that can be adapted by other stock exchanges to promote transparency and governance.     

Towards an understanding of excel functional skills needed for a career in public accounting: Perceptions from public accountants and accounting students

Public accounting firms (e.g., Grant Thornton, 2012) are stressing an interest in recruiting accounting students with a proficiency in Excel. The purpose of this study is to investigate which Excel functions are perceived to be important and useful for new hires to understand prior to starting a job in public accounting. We collect survey data from four large public accounting firms as well as undergraduate and graduate accounting students (i.e., potential new hires) to gauge perceptions of Excel importance, knowledge, and usage in public accounting. We find that employees at the firms believe the most important Excel functions are: basic formula, filter and sort data, vertical (horizontal) lookup, formatting of documents, and If/Then statements. In a comparison of new hires at public accounting firms with accounting students, results suggest that accounting students underestimate the importance and usage of some of these Excel functions. In addition, results suggest that new hires’ perceived knowledge on how to use specific Excel functions in their accounting job is statistically different than students’ perceived knowledge on how to use some of the same Excel functions. Our research contributes to educational accounting literature by documenting which Excel functions employers in public accounting want new hires to know prior to starting a job in public accounting. Also, this research informs accounting educators that students’ perceptions are not the same as public accounting employers’ expectations with respect to analytical skills using Excel technology.     

On the Choice of Superannuation Funds in Australia

Using a sample of Australian retail and wholesale superannuation funds to proxy for choice and limited choice alternatives, respectively, we investigate the costs and benefits of providing choice to investors. We find that investors who have choice don't respond to fees. Also, loads - typical of the choice environment - are likely to be a dead-weight loss borne by investors. Employees who involuntarily contribute to (employer) funds, tend to pay the lowest fees. Given these results, the advantages of choice become questionable. Our results show that managers of limited choice funds achieve greater positive abnormal returns than retail fund managers. The analysis of flows provides insight into why choice funds do not perform better than limited choice funds. Investors are not responding to historical performance as predicted.     

Occupational status,earnings, and fertility expectations: Development and estimation of a causal model

Summary This paper tests, within the framework of LISREL, the causal structures of occupational status, earnings, and fertility expectations using data from the 1984 Canadian Fertility Survey of currently married and common-law women aged 18–44. Differential occupational status, earnings, and fertility among three groups of wives classified by generation of Canadian residence are also examined. The models incorporate age, education, work experience, and ethnic/English language ability as exogenous determinants of occupational status, earnings, and fertility.The major findings are: (1) lower earnings of third generation wives are strongly related to lower levels of education, work experience, and job status; (2) wives who speak an ethnic language are likely to have lower fertility than comparable wives who do not speak an ethnic language; and (3) generational effects on earnings and fertility are limited to differences in education, work experience, and occupational status.The author is grateful to Dr. Karol J. Krotki, co-director of the Canadian Fertility Study, for permission to analyze the Canadian Fertility Survey data. Special thanks are also due to Ms. Margaret King for her comments on an earlier draft of the paper.     

Income diversification and risk: Does ownership matter? An empirical examination of Indian banks

We examine the impact of ownership on income diversification and risk for Indian banks over the period 2001–2009. We investigate both the determinants of non-interest income and the impact of diversification on various profitability and insolvency risk measures for public sector, private domestic, and foreign banks. We document that ownership does matter in the pursuit of non-interest income. Relative to private domestic banks, public sector banks earn significantly less fee-income, while foreign banks report higher fee income. Public sector banks with higher levels of governmental ownership are significantly less likely to pursue non-interest income sources. Fee-based income significantly reduces risk, measured by profitability variables, for public sector banks. Default risk is also reduced for these banks. From a regulatory perspective, it appears that diversification benefits India’s public sector banks. Our research has implications for the changes in the risk profile for banks in emerging banking markets pursuing non-interest revenue sources.     

Institutional quality,investment efficiency,and the choice of public–private partnerships

We examine a sample of 625 public–private partnership (PPP) firms from 1980 to 2015 that straddle nine countries with varying degrees of economic development and PPP markets. We find that the motivations of the firms that undertake PPP investments vary. While private sector firms in economies with low institutional quality choose to engage in PPPs to alleviate capital constraints attributed to underinvestment, those in economies with high institutional quality participate in PPPs to solve the problem of overinvestment due to an abundant cash flow. In the long run, the benefits of lower capital constraints through PPP investments are more pronounced in economies with high institutional quality.