Depositor Discipline in the Banking Sector in India: An Empirical Investigation

Journal of Quantitative Economics - The paper traces the determinants of depositor discipline in Indian banking. Using annual data on commercial banks covering the period 1996 to 2003, the findings...     

Bank Debt Use and Firm Size: Indian Evidence

The paper employs a sample of listed Indian manufacturing firms over the period 1995–2004 to examine the factors influencing the concentration of bank debt in total debt. The results indicate that the factors vary by firm size. Small to medium-sized firms have a high concentration of bank debt. The results support the reputation view that firms face differential debt choice as they grow larger. When evaluating bank regulations, policymakers need to consider the importance of the reputation-building service which banks provide to businesses.     

Skilled and Unskilled Immigrants and Entrepreneurship in a Developed Country

Evidence from some OECD countries suggests that skilled immigrants are over‐represented in entrepreneurship. We offer an analytical explanation to show that it may be a direct outcome of asymmetric information between immigrants and potential employers in the rich countries. Limiting occupational choices to self‐employment and employment, we show that skilled immigrants vis‐à‐vis natives may be proportionally over‐represented in small businesses. This compensates for the income loss in the labor market. It results from higher critical risk aversion among skilled immigrants compared with natives and subsequently leads to higher average income for all immigrants in the cross‐section. Finally, we show why a lesser number of unskilled immigrants enter self‐employment and discuss the speed of income convergence between all immigrants and natives.     

Does R&D intensity influence leverage? Evidence from Indian firm-level data

The paper examines the association between corporate leverage and their investment in R&D. Towards this end, it develops certain testable propositions. These propositions are tested using a dataset of manufacturing firms in India covering the period 1995?C2010. Three main results are gleaned from the analysis. First, the optimal leverage ratio typically declines with R&D intensity. Second, the financial crisis has exerted a negative effect on leverage for firms. And finally, the dampening effect of R&D intensity on leverage is the highest for foreign private firms.     

Urban informal sector and poverty

Many studies have explored the connection between trade and poverty theoretically and empirically for the developing world. We offer another look at the possible implications of trade liberalization on urban poverty by using the urban informal sector as a catalyst. The theory shows that trade liberalization in the import competing sector raises informal wage across occupational types, and expands production and employment in the informal industrial segment. Further, using Indian provincial data on wage, capital stock and value added in the informal sector we show that real informal wage increased with trade reform and transmitted favorable impact on urban poverty reduction.     

Trade,migration costs and asymmetric migration patterns

Increase in trade has an asymmetric impact on emigration by skill types for a developing country. Cost of migration is a dynamic function of the type of emigration, and it determines a complementary relation between emigration of skilled workers and expansion of trade. Emigration of unskilled workers is a substitute, however, and these outcomes coexist with endogenously determined emigration rates that depend crucially on wage responses among the own skill types at the source. Additionally, asymmetric emigration patterns increase wage inequality.     

Ownership,evergreening and crisis: an analysis of bank–firm relationships in India

Employing data on publicly listed firms for 1995–2012, the article examines the behaviour of bank lending and interest cost and how it evolved during the crisis. The evidence suggests that high-Non-performing Loans (NPL) main banks raised their lending and lowered lending rates during the crisis, especially to risky, low-profit firms, indicative of a flight from quality. A disaggregation of the possible reasons for the flight from quality provides evidence in favour of short-termism behaviour by banks. The analysis also provides evidence in support of tunnelling by risky firms, which became amplified during the crisis. The net effect of these developments was a perceptible reduction in overall employment.     

Erratum to: Competitive price-matching guarantees under imperfect store availability

This paper analyzes the role of verification of product availability in the context of competitive price-matching guarantees (PMGs). PMGs involve a retailer matching any lower price offered by competition for an identical item. Until now, researchers focused on the scenario where customers can receive the lower price with a simple proof (e.g., weekly flyers). However, in reality, retailers reserve the right to verify the availability at the competitor location; if the product is not available there, then the price-match request might be declined. We develop a price competition model to investigate the effects of verification of availability on price decisions and profit levels of competing retailers. In our model, demand is driven by the availability levels of retailers as well as the price-search cost and store-switching cost incurred by customers. Price-search cost leads to two customer segments: uninformed ones who have no knowledge about prices, and informed ones who are knowledgeable about prices. On the other hand, store-switching cost determines how many customers search for the product at an alternative location because of high price or unavailability at their preferred retailers. Our analysis reveals, among others, that the outcome of availability verification is linked to three factors: price-search cost, store-switching cost, and the reservation prices of customer segments. Verification of availability allows retailers to price discriminate customers who could not be discriminated otherwise, specifically those belonging to the informed customer segment. Furthermore, it is a significant profit-enhancing mechanism only if there are switching customers in the market. Interestingly, even though customers view the verification of availability as a hassle, it can actually result in them paying lower retail prices by increasing the level of retail price competition.     

Emigration,Finite Changes and Wage Inequality

This article shows that large outmigration of labor leads to finite changes in the structure of production at source. We argue that sectors may vanish as they cannot pay higher wages consequent to emigration. We also inquire whether emigration of one type of labor hurts the other non‐emigrating type in this setup. Various situations when real incomes of the emigrating and the non‐emigrating types do not move together are demonstrated. This generalizes some of the existing results in the literature. In particular, emigration can lead to a drastic change in the degree of inequality depending on which of the sectors survive in the postemigration regime.