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Purpose: The purpose of this paper is to investigate empirically the difference in long run post issue performance of initial public offerings (IPOs) that tapped the Indian primary market through a fixed price offer and book building offer; also to assess the persistence of underperformance between these two routes of offering. Design/methodology/approach: The after market performance of the IPOs is empirically assessed based on their market prices and also taking into consideration the other factors associated with the after market performance such as the period of issue (boom/slump), sector in which the industry is operating, etc. Findings: The results suggest that there is no difference in the direction of performance of the issues post listing in the short run, however in the long run the issues that tapped the market through the book building route seemed to perform far better than the ones that raised money through a fixed price offer. The results also suggested that the average return irrespective of the route of issue remains the same and this is because of the high initial return of issues that tapped the market with fixed price offers. Originality/value: The paper provides useful information about the IPO markets of India and abroad, related literature and theories or hypotheses concerning methods of issue.

Disinvestment of government shareholding in Public Sector Undertakings, through Public Offers, is a common occurrence in many economies. This case describes such a process of disinvestment of the government of India's stake in a large power utility, National Thermal Power Corporation (NTPC) in India. In addition to process details, the case contains information and data that make it possible to rigorously analyze the response of market participants and the resulting changes in the prices of shares of NTPC before, during and after the public offer.

The purpose of this study is to examine the influence of earnings management during initial public offerings on the listing day returns.

The study collected data for 511 Indian IPOs that came between April 2003 and March 2019 for calculating earnings management. On the basis of the Cross Sectional Modified Jones Model 1995, the paper presents three proxies of earnings management as discretionary accruals (DA), discretionary current accruals (DCA) and discretionary long-term accruals (DLA). The study further used correlation and multiple regression analysis to assess the impact of earnings management on listing day returns.

The findings show that earnings management and listing day returns vary through issue-year and industry-type. Apart from it, the study reveals a greater contribution of short-term accruals in earnings management on the basis of higher DCA values. It also discloses that the aggregate level of earnings management (DA) influences listing returns, whereas DCA and DLA separately have no impact on the listing day returns of the Indian IPOs.

The findings are useful to potential investors and analysts to observe, assess and understand the quality of financial reports that are based on fallacious disclosure of accounting figures. The study also reflects the efficacy of Indian regulatory norms for IPOs in constraining earnings management and underpricing, thus providing meaningful insight to the policy makers and the regulators.

This study is distinguished by its focus on determining the influence of earnings management on listing day returns in Indian IPOs by using three earnings management proxies.

This paper aims to investigate the impact of the underwriters’ syndicate size (SS) and its structure on underpricing (UP), oversubscription rate, liquidity and volatility. The authors use a database of 185 initial public offers (IPOs) issued in India during the period 2012–2019.

The authors have used ordinary least squares regression and stepwise regression on cross-sectional data to construct the regression model for the dependent variables under consideration, namely, UP, subscription rate (SUB), listing day volatility and listing day liquidity.

The authors find that larger syndicates reduce UP. The authors also find strong evidence of a larger subscription rate for IPOs managed by larger syndicates, suggesting that larger syndicates generate more information in the market. Looking into the composition of investment banks in the syndicate, the authors find that syndicates comprising more lead managers and comanagers attract a higher subscription from potential investors. More book running lead managers and nonmanaging syndicate members help increase liquidity and reduce the volatility of IPO stocks on listing day. Additionally, the authors find that larger firms with reputed lead managers establish larger syndicates while venture-affiliated IPO firms prefer a smaller syndicate.

The findings would interest issuing firms, investors, intermediaries and policymakers engaged in formulating syndicates for better management of IPOs.

The study extends the present literature on IPO syndicates, particularly in the Indian context as an emerging economy. The study extended the present understanding of SS and composition, creating value for the issuers.

This study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management around the IPOs.

A sample of 511 IPOs that came during April 2003-March 2019 is studied for calculating earnings management for pre-issue, issue and post-issue years. Using Cross-Sectional Modified Jones Model, the paper presents earnings management on the basis of three proxies i.e. discretionary accruals, discretionary current accruals and discretionary long-term accruals. The influence of issue characteristics on earnings management practised around the IPOs is also observed through correlation and multiple regression analysis.

The paper finds that earnings management is abnormally high during the issue year compared with pre-issue and post-issue years. It also unveils that profitability, premium, age, and size of the issuer significantly determine the level of pre-issue and issue year earnings management practised by Indian IPO issuers.

The findings are useful to stakeholders (potential investors, analysts and regulators) to observe, assess and understand the quality of financial numbers that are based on fallacious disclosure of accounting figures. It provides insight into the possibilities of managed earnings around the issue that could influence investors’ decision-making. Further, the study reflects the efficacy of Indian regulatory norms for IPOs.

To the authors’ knowledge, it is the only Indian study that had used an extensive data set of about two decades to calculate earnings management during pre-issue, issue and post-issue years. The uniqueness of the study further lies in three proxies of earnings management representing short-term and long-term accruals. Moreover, it is the first study to observe the influence of IPO issue characteristics on earnings management.

Prior research on earnings management largely assumes that newly public firms manage earnings opportunistically around IPOs. However, only a few studies have empirically examined the real motives behind newly public firms’ earnings management. The purpose of this paper is to examine the impact of ownership dilution on earnings management among IPO firms. The authors chose the setting of security offerings in an emerging market, which is characterised by unique ownership structure, to examine the possible incentive of owners or pre-IPO shareholders to engage in earnings management.

The study employs accrual and real transactions measures to check the presence of earnings management among 409 IPO firms from India during the period 2000‒2018. Subsequently, using ordinary least squares regression models with heteroscedasticity-robust standard errors, this paper examines the relationship between earnings management and selling or dilution incentives of pre-IPO shareholders.

The study finds that the degree of earnings manipulation by issuer firms is positively associated with the ownership dilution at the time of IPO as well as around lockup expiration.

The findings of this study will help the investors and regulators to understand the practice of earnings management among IPO firms and how it is linked to the ownership dilution of pre-IPO shareholders.

The paper contributes to the limited stream of research that investigates the motives of earnings management among IPO firms. It empirically establishes an association between the selling incentive of pre-IPO shareholders and earnings management.

The learning outcomes of this paper is as follows: to understand and analyze the turnaround model of Pearce and Robbins (1993); to familiarize with parameters and actions in the Prompt Corrective Action (PCA) framework of Reserve Bank of India (RBI); to comprehend the probable situation warranting turnaround; to identify the key ratios which signal the financial health of a bank; and to understand the applicability of the turnaround model in bank’s revival.

The case explores various challenges faced by Mr Prashant Kumar during the turnaround process of Yes bank. The youngest bank started its operation in 2004, and in the first six years of operations, Yes bank registered a compound annual growth rate of 100% on the balance sheet, becoming the fourth-largest private sector bank in the country. However, the irony is that this shine and glitter was a short-lived phenomenon and after the regulatory inspection of 2016, Yes bank collapsed like a house of cards. This case has incorporated the three major phases of Yes bank i.e. the rise, the fall and the revival. The turnaround process led by Mr Kumar was explained using the turnaround model given by Pearce and Robbins (1993) and the PCA framework of the RBI. The conditions which warranted the need for the turnaround in Yes bank and the factors responsible for the same are discussed. The multiple challenges faced by Mr Kumar and the strategic responses adopted by him were incorporated in great detail. What were the outcomes of those strategic choices? Should he continue with similar approaches? Was he successful in stabilizing the bank which was broken from the core? What next if stability is achieved? How Mr Kumar should lift Yes bank to the recovery zone? And most importantly, will Mr Kumar be able to change the poor public image of Yes bank? The reflections of all the above questions are narrated with the actions of Mr Kumar.

The case is intended to be taught in the class of strategic management for postgraduate-, master- or executive-level participants of business administration. As the case is focused on a banking organization, it also can be taught in banking class.

Teaching Notes are available for educators only.

CSS 1: Accounting and Finance.

The purpose of this study is to examine the issue of bank capital structure which has been widely debated in recent times, especially in view of the envisaged implementation of the revised Basel capital standards. An issue that has not been adequately addressed is the factors affecting capital structure of banks from a corporate finance perspective. To address this, the authors assemble data on publicly listed Indian banks for an extended time span and compare the findings with a comparable sample of largest non-financial firms.

In view of the longitudinal nature of the data, the authors use panel data techniques to examine the issue.

The analysis indicates that profitability, growth opportunities and risk are the factors that are most relevant in influencing bank capital. Second, the crisis appears to have exerted a perceptible impact on bank capital.

On balance, the findings refute the conventional wisdom that bank capital structure is purely a response to the regulatory requirements. Instead, the results would that banks’ capital decisions are influenced by several non-regulatory considerations as well, including government policies toward banks, which is particularly relevant in countries with predominantly state-owned banking systems.

First, the authors examine the relevance of bank ownership for leverage, an aspect not adequately addressed in emerging economy banking systems. Second, they consider the impact of regulatory pressure on bank leverage, which assumes relevance in the aftermath of the crisis, wherein banks have been hard-pressed for capital. And finally, they contribute to the thin literature on the interlinkage between capital structure and board structure for banks.

Using a sample of 6,198 US firms that went public from 1975 to 2004, the purpose of this paper is to examine when these firms come back to the equity market and investigate the determinants of the timing decision.

By properly modeling the time between two consecutive equity offerings using the duration analysis, the author tests different hypotheses in a unified framework and investigates their relative importance in explaining the timing decision of seasoned equity issuance.

The paper documents that firms often return for a new round of equity issuance shortly after the preceding one. First seasoned equity offerings (SEOs) after the IPO are more likely to be conducted at a faster speed than subsequent (follow-on) SEOs. The duration analysis shows that first SEOs are more likely to ride the aggregate stock market wave and take advantage of the idiosyncratic mispricing of the stock than follow-on SEOs. On the contrary, both macroeconomic and firm-specific growth opportunities are more important for follow-on SEOs than for first SEOs.

The paper employs a novel econometric method to depict a dynamic picture of SEO decisions. The results provide a possible explanation to reconcile the discrepancies in the findings of prior studies. Namely, those studies examining mostly first SEOs could bias toward the timing hypothesis, while those studies focussing on follow-on SEOs is more likely to find evidence that supports the need for growth.

The purpose of this paper is to demonstrate how fixed‐share prices, as a structural flaw in private equity funds targeted to small‐unit investors, economically disadvantages those investors in favor of sponsors.

The theoretical model incorporates fixed share prices with continuous investment opportunity and evaluates the wealth transfer from long‐term investors to marketing affiliates and soliciting dealers in the form of fees paid on the sale of shares to follow‐on investors.

This result holds in the presence of high‐payout dividend policy that attempts to compensate for wealth transfer.

Should share prices be marked‐to‐market using real estate appraisals or another method, the unlisted REIT and related offerings, such as tenant‐in‐common funds, will be profitable for sponsors without economically disadvantaging long‐term investors.

The findings from this research are useful to fund sponsors who design real estate investment products for small‐unit investors. These products may retain the advantageous characteristics of existing products while eliminating the disadvantageous features.

This is the first academic research on private equity capital raised from small‐unit investors.