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This paper aims to center on the analysis of corporate recovery from internal ethical failure with the examination of Wells Fargo and Company. To move beyond self-inflicted reputational damage and regain sales traction, successful turnaround companies have embarked on a four-step corporate recovery process centered on four key words: Replace, Restructure, Redevelop and Re-brand. Wells Fargo is one recent addition to these recovery stories.

This paper uses Wells Fargo and Company as a case model to examine corporate recovery. Wells Fargo is just one example of multinational companies that found themselves victims of internal impropriety, poor leadership supervision and unethical strategic decision-making resulting in significant financial losses, drastic declines in stock price and damaged reputation. Using Wells Fargo as an example from the banking industry, the case study approach is an effective way of assessing the viability of the corporate recovery model in various industries.

The corporate recovery model has served Wells Fargo well over the past few years as the stock price climbed nearly 60% in 2021. In addition, increasingly less public discussion about the account fraud scandal has allowed the reputation of the bank to recover as well. By the last quarter of 2021, the bank saw a 15% increase in revenue and an 86% increase in net income over the previous year. It appears that CEO Scharf is well on his way to turning around the prospects for Wells Fargo and the recovery model has proven again that there is a way through self-inflicted corporate damage.

The recovery story of Wells Fargo and Company adds to the litany of successful corporate recoveries where companies have achieved unprecedented turnarounds by following the model of replacing the leadership, restructuring the organization, redeveloping the strategy and re-branding the product. Implementing this four-pronged recovery strategy can help a company not only survive their specific scandal but also move away from reputational harm and get back on a growth trajectory.

After studying and analysing this case, students would be able to evaluate and understand the importance and need of an infrastructure sector in a country, its inherent risks and scope of infrastructure investment and financing in India – National Infrastructure Pipeline and the important role of Non-Banking Finance Company’s (NBFC) vis-à-vis banks in infrastructure financing in India; critically analyse and recommend alternative decisions in a business problem situation using multi-criteria decision analysis, which is a tool used for business portfolio analysis; understand and evaluate the corporate portfolio management (CPM) tools used for an optimum portfolio mix to turn around companies; identify and suggest an optimum portfolio mix to turn around a finance company using CPM assessment applied to Pidun matrix; and recommend operational and strategic levers for successful turnaround implementation by using the integrated canvas on turnaround.

On 10 May 2020, in New Delhi, India, J. Ray took charge as a full-time director of an Indian Non-Banking Finance Company – Infrastructure Finance Company (NBFC-IFC). The NBFC-IFC of the Indian Government extended long-term financial assistance to infrastructure projects in India. During the financial year (FY) 2017–2018 till FY 2019–2020, the company suffered substantial losses to the tune of US$13.7bn, with profitability experiencing a notable decline – return on assets at a negligible 0.11% and return on equity of only 0.68%.

The NBFC-IFC had a declining yield on advances at 7.05%, net interest margins (NIMs) of 2.08% against a high cost of borrowing at 7.66%, a declining loan book (by 4.35%) of US$336.27bn and a fast-deteriorating asset quality with highest ever non-performing assets (NPAs) at 19.70% of its loan book. Such financial parameters, compared with that of the industry average of banks and finance companies, meant that the NBFC-IFC Ray had taken over was fast bleeding and was on the brink of being declared a sick company. In comparison, private and other government players had profitable and much healthier financials, and Ray felt that there was a need for improvement. To make things worse, Ray got to know that the Indian Government was in the final stages of setting up a new development finance institution focused on long-term infrastructure financing in India. Ray realized the question was not only of the NBFC-IFC remaining relevant but also of its existence in the fast-evolving sector. Ray wondered what could his his integrated canvas be for a turnaround strategy that could include effective management of an optimal portfolio mix.

With a healthy capital-to-risk (weighted) assets ratio of 30.85% and a satisfactorily improved net worth of US$103.1bn, in the given Reserve Bank of India regulatory provisions for the NBFC-IFC including restrictive exposure norms and NBFC-IFC’s operational mandate prescribed by the Indian Government, Ray had to shift the product and sectorial investment of the NBFC-IFC to reduce the NPAs, increase loan book size and improve the yield of advances and its NIM to effectively turn around the company’s profitability. Ray realized that he needed his team to evaluate and select a product and sector strategy for this change.

The present case of financing investment in infrastructure is interesting for implementation in developing economies because a lack of infrastructure is a common problem and there is a necessity of achieving a more developed infrastructure system to support accelerated economic growth in these countries. This case can be used in elective courses on corporate finance strategy and corporate portfolio management for infrastructure finance companies. This case can be taught in elective courses in post-graduate and MBA programs. This case can also be included in management development programs (MDP), executive MBA programs and executive-level courses that have subjects such as corporate finance strategy, corporate portfolio management and strategy management that focus on turnaround strategies including portfolio management for banks and finance companies.

Teaching notes are available for educators only.

CSS 11: Strategy.

This paper aims to investigate the impact of retrenchment strategy on firm performance in the context of Pakistani firms while considering the moderating role of chief executive officer (CEO) power. By examining the influence of CEO duality and CEO share ownership on the relationship, this study contributes to strategic management and corporate governance knowledge within the Pakistani business environment.

A quantitative approach was used to analyze the relationship using data from annual financial statements. The sample consisted of 76 companies from the KSE-100 index from the year 2015 to 2020. Random effects regression models were used, along with hierarchical regression to explore the moderating effect of CEO power.

The findings demonstrate that the implementation of a retrenchment strategy positively impacts firm performance in Pakistani firms. The study also reveals that CEO power plays a crucial role in strengthening the relationship between retrenchment strategy and firm performance. Moreover, the study highlights the importance of considering the temporal sequence, size and age of firms when examining the impact of CEO power and retrenchment strategy on firm performance.

The study enhances the understanding of the contingent nature of retrenchment strategies and the influence of CEO power in the Pakistani business context. Practically, the research contributes to strategic management and corporate governance dynamics, facilitating the development of strategies that enhance firm performance and sustainability in Pakistan.

This research provides original insights by specifically focusing on the Pakistani context and analyzing the interplay between retrenchment strategy, CEO power and firm performance. The study adds to the limited literature on the relationship between retrenchment and performance in the Pakistani business environment. Additionally, it highlights the significance of CEO power as a critical factor in determining the success of retrenchment.

The purpose of this paper is to understand how Chairman and Managing Director (CMD) of the National Research Development Corporation, India, Hanumanthu Purushotham had facilitated a turnaround of the organization and ensured profitability during his tenure there. This is one of the series of interview-based studies that focuses on a South Asian CEO, with the goal of ascertaining his leadership and management style in a volatile situation. This brief paper expounds how leader traits and transformational leadership can positively impact an organizational turnaround and fuel growth.

This paper uses primary interviews and complements the findings with secondary data sources such as annual reports and management literature on leadership trait, transformational leadership and organizational turnaround.

The study found that socioeconomic factors have a bearing on leadership attributes. In this instance, the CMD's early years, diverse work experiences, bright traits and transformational leadership positively impacted organizational performance. Therefore, not only the qualifications but also the qualities of a leader are pivotal in shaping success of an organization.

The narrative provides an instance of how decision-making driven by strategic leadership can change firm performance. The rich experiences of the India-educated CMD, a government job holder all-through, provides a veteran's view to decision-making in a state-controlled firm and helps us understand how an organization can be transformed in a limited time and with scarce resources.

While Merger & Acquisition (M&A) activity has reached unprecedented levels over recent years, M&A failure rates remain high. Yet, there is growing evidence that private equity funds show high success rates. As little is known about the differences between different types of buyers, and only scant information exists on private equity funds’ operations, we inductively explore the reasons for their outperformance. In this qualitative study, we identify three characteristics (i.e., organizational set-up, private equity investors’ professional identities, and an integrative work approach), which we brought together into a theoretical framework that explains how private equity professionals can enable better M&A performance. Finally, our findings underline the effectiveness of specific incentivization approaches applied in private equity funds.

This study aims to investigate the influence of resource slack on the decline of Brazilian companies, with a particular focus on the moderating role of environmental dynamism. The authors specifically examine three types of resource slack: available, potential and recoverable. These represent surplus resources that exceed what is necessary for the organization’s basic operations. The role of environmental dynamism, characterized by rapid changes in customer preferences, technologies and competitive dynamics, is considered as a moderating factor in this relationship.

The authors used data from Brazilian companies spanning from 1997 to 2008. The research sample was composed using the matching-pairs method, which included a group of publicly traded companies that experienced decline (43 companies) and a group that did not (40 companies) within the specified timeframe.

Findings of this study indicate that the presence of available slack, being more liquid resources, decreases the likelihood of organizational decline. Furthermore, the moderation effect of potential resource slack can mitigate decline in companies operating in dynamic industries.

This research provides valuable insights into the impact of slack resources on potential organizational turnarounds. Given the relative scarcity of resources in these companies compared to those in developed countries, whether they be financial, human or technological, the study highlights the unique influence of slack in a less explored institutional environment. This research underscores the importance of examining the decline of Brazilian companies from a broader perspective, emphasizing that decisions regarding resource use can have significant implications on a company’s trajectory, either amplifying or mitigating its decline.

¿Cuál es el impacto del slack de recursos en el declive de grandes empresas brasileñas? Para responder a esta pregunta, hemos probado hipótesis por separado para tres tipos de salck de recursos: disponible, potencial y recuperable. Estos excedentes consisten en recursos en exceso más allá de lo necesario para mantener la organización funcionando.

Desarrollamos un estudio empírico cuantitativo y longitudinal con datos de empresas brasileñas de 1997 a 2008. Adoptamos el método de pares emparejados, componiendo la muestra de investigación con un grupo de empresas cotizadas en bolsa que declinaron (43 empresas) y otro que no declinó (40 empresas) en el período de tiempo.

Encontramos que la disponibilidad de recursos más líquidos reduce la posibilidad de declive. El efecto de moderación en el slack de recursos potenciales para empresas en industrias dinámicas puede mitigar el declive.

Esta investigación contribuye a una mejor comprensión del efecto del excedente en posibles recuperaciones. Extender los estudios de recursos excedentes al contexto de empresas brasileñas mostró la influencia que el excedente ejerce en un ambiente institucional relativamente menos explorado. Ya sea financiero, humano o tecnológico, la escasez de recursos es más pronunciada que en empresas de países desarrollados. Esta investigación llama la atención sobre el hecho de que la declinación de empresas brasileñas se analiza desde una perspectiva más amplia. Las decisiones sobre cómo la empresa usa sus recursos pueden afectar positiva o negativamente la declinación de las empresas, reforzando la importancia de discutir esta relación.

A Qual é o impacto da folga de recursos no declínio de grandes empresas brasileiras? Para responder a essa pergunta, testamos hipóteses separadamente para três tipos de folga de recursos: disponível, potencial e recuperável. Essas folgas consistem em recursos além do necessário para manter a organização funcionando.

Desenvolvemos um estudo empírico quantitativo e longitudinal com dados de empresas brasileiras de 1997 a 2008. Adotamos o método de pares combinados, compondo a amostra de pesquisa com um grupo de empresas de capital aberto que declinaram (43 empresas) e outro que não declinou (40 empresas) no período.

Descobrimos que a disponibilidade de recursos mais líquidos reduz a possibilidade de declínio. O efeito moderador na folga de recursos potenciais para empresas em indústrias dinâmicas pode mitigar o declínio.

Esta pesquisa contribui para uma melhor compreensão do efeito da folga sobre possíveis recuperações. A extensão dos estudos de folgas de recursos para o contexto de empresas brasileiras mostrou a influência que a folga exerce em um ambiente institucional relativamente menos explorado. Seja financeiro, humano ou tecnológico, a escassez de recursos é mais pronunciada do que em empresas de países desenvolvidos. Esta pesquisa chama a atenção para o fato de que o declínio de empresas brasileiras é analisado sob uma perspectiva mais ampla. Decisões sobre como a empresa usa seus recursos podem afetar positiva ou negativamente o declínio das empresas, reforçando a importância de discutir essa relação.

The objective of writing this case study is to allow management students to engage with the complexities of mergers and acquisitions (M&As) in the insurance sector in an emerging economy like India. Upon completion of this case study, the students will be able to critically evaluate the business environment of the insurance sector of a developing economy like India, analyse the impact of M&As on the insurance industry of India, appraise the post-merger consequences and strategies to deal with these consequences, assess the applicability of market power and growth theories in the context of M&As and develop a strategic action plan for handling post-merger challenges.

On 3 September 2021, the Insurance Regulatory and Development Authority of India (IRDAI) approved the “Scheme” related to the merger of the non-life insurance division of Bharti AXA General Insurance Company Limited (“Bharti AXA”) with ICICI Lombard General Insurance Company Limited (“ICICI Lombard”). Earlier, on 21 August 2020, the boards of the companies had approved entering into definitive agreements through a scheme of arrangement. The merger received approvals from different regulatory bodies as mandated (Gandhi et al., 2023). Bhargav Dasgupta, managing director and Chief Executive Officer of ICICI Lombard, stated, “This is a landmark step in the journey of ICICI Lombard, and we are confident that this transaction would be value accretive for our shareholders” (FE Bureau, 2020). However, the merger posed a dilemma for Dasgupta and the management regarding crop insurance owing to its impact on profitability. Crop insurance historically had high claim ratios nearing 135% for ICICI Lombard for financial year 2018. The company ceased to underwrite this product from 2019 onwards (TNN, 2019). However, ICICI Lombard had to fulfil the three-year commitment made by Bharti AXA to the state governments of Maharashtra and Karnataka towards crop insurance. It was a scheme initiated by the Government of India, covering farmers against losses due to cyclonic rains, rainfall deficits and other unforeseen calamities. Dasgupta faced a challenge in managing the interests of the farmers and the company’s shareholders while balancing profitability, which had already been impacted by the COVID-19 pandemic. This case study delves into post-merger complexities in the financial sector non-life insurance industry in emerging countries like India.

This case study is suitable for undergraduate and post-graduate management students and executives from the insurance industry.

Teaching notes are available for educators only.

CSS 11: Strategy.

Women-led enterprises can count on intellectual capital (IC) to implement a knowledge exchange process, improve managerial skills and provide themselves with more certain and reasonable financial resources. Recently, the literature has recognized a new paradigm of innovation, known as open innovation (OI) that emphasizes the strategic importance of relationships for knowledge development. The paper, first, aims to investigate if IC can support female agri-start-ups’ innovation process. Second, the aim is to analyse the ways in which IC supports female agri-start-ups.

The work uses a qualitative methodology and a multiple case study supports the paper. Data were acquired using direct semi-structured interviews. To read and interpret them, the authors resorted to the C.A.O.S. model that permits examining the direct relationships in terms of relational capital (RC) and also, observing the effect produced by the relational circuit in terms of human capital (HC) and structural capital (SC) in small and medium enterprises.

Findings reveal that RC plays a fundamental role in innovative start-up's development. The S-C and S-O links support business management and help fill the gender financial gap. This leads to improving entrepreneurial skills (HC) and promoting internal innovative solutions (SC). The S-A links can help the entrepreneur acquire more awareness of the market and compete better.

The research contributes to IC and gender studies, with a specific focus on RC and the innovation process. Although the literature has already investigated the role of RC in female entrepreneurship, only few previous research have conducted a qualitative analysis about the relationships established in the peculiar context of innovative agri-start-ups.

Chinese firms are winning market share from foreign multinational enterprises in domestic markets. The international business literature suggests that this is happening because these firms are developing non-traditional firm-specific advantages (FSAs). Strategic factor market (SFM) theory provides a good basis for explaining how this is happening. However, it is underdeveloped in terms of analysing unique resources and unique access to those resources by Chinese firms in their domestic markets. This paper aims to develop a framework to understand how Chinese firms have developed non-traditional FSAs.

The case study method is adopted to explore how Chinese firms develop non-traditional FSAs. Specifically, the authors compare paired case studies of a Chinese firm and a foreign multinational in each of two industries.

The authors find that Chinese firms have developed non-traditional FSAs because of more relevant experience, better adapted strategies and privileged relationships. This has enabled Chinese firms to develop non-traditional FSAs.

The authors propose a framework that conceptualises non-traditional FSA development in Chinese firms as a product of superior access to unique and valuable resources in their domestic SFMs.

The impact of founder CEOs on firm value continues to be debated in the finance literature. While earlier studies suggest that founding family ownership and founding CEO structure create less value than public ownership, later studies provide contradicting evidence. This study examines how founder CEOs affect firm value in the business group context while controlling for firm-specific variables and various CEO characteristics.

The authors use a sample of publicly listed Indian firms from 2010 to 2015 with 997 firm-year data observations. While 306 of these are in business groups, the remaining 691 are in a nonbusiness group. The authors also divide the sample into various sector subgroups, including materials (170), industrials (198), consumer (422) and others (198). They use two different models, including the fixed effect model (FEM) and pooled generalized method of moments (GMM) model to run regressions.

The authors find that firms with founder CEOs have lower firm value than those with nonfounder CEOs. These results show the importance of the role of founder CEOs in the Indian business groups. The authors further find a positive relationship between founder CEO and business group interaction variable, showing that an increase in founder CEO (or business group) increases the significance effect of business group (founder CEO) on firm performance. After separating the sample business and nonbusiness groups, the relationship between founder CEOs and firm value in both groups remains negative. Using various firm-specific control variables, the authors find that highly leveraged and smaller firms experience lower Tobin's Q. In contrast, firms with more investment in research and development perform better. Among CEO characteristics, the authors find that firms with highly educated CEOs do not perform well, while firms with older CEOs do better. Finally, they find that CEO tenure and duality are associated with lower firm performance.

This study adds value by providing evidence on the founder CEOs and firm performance in business groups from a fast-developing emerging market.