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Article
Publication date: 12 July 2022

Gaurav Gupta, Jitendra Mahakud and Vishal Kumar Singh

This study examines the impact of economic policy uncertainty (EPU) on the investment-cash flow sensitivity (ICFS) of Indian manufacturing firms.

Abstract

Purpose

This study examines the impact of economic policy uncertainty (EPU) on the investment-cash flow sensitivity (ICFS) of Indian manufacturing firms.

Design/methodology/approach

This study uses the fixed-effect method to investigate the effect of EPU on ICFS from 2004 to 2019.

Findings

This study finds that EPU increases ICFS, which is more (less) during the crisis (before and post-crisis) period. The authors also find that the effect of EPU on ICFS is more for smaller, younger and standalone (SA) firms than the larger, matured and business group affiliated (BGA) firms. This study also reveals that EPU reduces corporate investment (CI). Further, the authors find that cash flow is more significant for the investment of financially constrained firms and the negative effect of EPU is more for these firms.

Research limitations/implications

This study considers the Indian manufacturing sector. Therefore, this study can be extended by analyzing the relationship between EPU and ICFS for the service sector.

Practical implications

First, this study can be useful for corporates, academicians and government bodies to understand the effect of EPU on ICFS and CI. Second, this study will help corporates to focus on internal funds to finance corporates' investment during the crisis period because EPU increases the cost of external finance which may increase ICFS and reduce CI. Third, lending agencies, investors and stakeholders should also focus on the firm's nature, ownership, size and age because these factors play a crucial role to reduce or increase the negative effect of EPU on ICFS. Fourth, the Government should make appropriate policy measures in terms of concessional interest rates to increase the easy availability of external finance for SA, small size, and young firms to reduce the negative effect of EPU on CI because these firms are considered as more financially constrained firms.

Originality/value

This study adds new inputs to the current literature of EPU in several ways. First, this study is one of the main studies focused on the relationship between EPU and ICFS (CI). Especially in emerging countries like India, examining this relationship extends previous research. Second, this study also examines the impact of EPU on ICFS for BGA, SA, small, large, matured and young firms as well as crisis and non-crisis periods. Third, this study uses the sample of the Indian manufacturing sector which has emerged the qualities to become a global manufacturing hub and attracting global investors. Therefore, examining the effect of EPU on ICFS for these firms will be more interesting.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 18 July 2022

Gaurav Gupta and Jitendra Mahakud

The purpose of this study is to examine the impact of financial distress (FD) on investment-cash flow sensitivity (ICFS) of Indian firms.

Abstract

Purpose

The purpose of this study is to examine the impact of financial distress (FD) on investment-cash flow sensitivity (ICFS) of Indian firms.

Design/methodology/approach

The study uses the system generalized method of moments (GMM) technique to investigate the effect of FD on ICFS of Indian firms during the period from 2001 to 2019.

Findings

Using FD measures like Ohlson's bankruptcy method, Altman's Z-score model and financial-distress ratio, the researchers find that FD increases ICFS and negatively affects corporate investment. The researchers’ findings explain that FD increases restrictions on external financing, which makes cash flow more important for corporate investment. Additionally, the researchers find that the effects of FD on ICFS are weak (strong) for bigger and group affiliated (smaller and standalone) firms. The study’s findings are robust to several measures of FD, group affiliation and firm size.

Practical implications

First, the researchers find that FD affects the ICFS, therefore, financially distressed firms should have sufficient internal funds or external funds for investment. Second, lending agencies should also consider the firms' FD condition before providing funds to secure their money. Third, investors should be very careful while investing in a financially distressed firm as we find that financially distressed firms face a decline in their investment which might reduce firm profitability.

Originality/value

This study contributes to the existing literature by providing empirical evidence by analyzing the impact of FD on ICFS in the context of India. As per the authors’ knowledge, this is the first-ever attempt to examine the effect of FD on ICFS.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 23 December 2020

Gaurav Gupta, Jitendra Mahakud and Vivek Verma

The purpose of this study is to examine the impact of financial and technical education of chief executive officer (CEO) on investment–cash flow sensitivity (ICFS) of…

Abstract

Purpose

The purpose of this study is to examine the impact of financial and technical education of chief executive officer (CEO) on investment–cash flow sensitivity (ICFS) of Indian manufacturing firms.

Design/methodology/approach

The study uses the dynamic panel data model and more specifically, the system-generalized method of moments (GMM) technique to investigate the effect of CEOs' education on ICFS of Indian manufacturing firms during the period 1998–1999 to 2016–2017.

Findings

The study shows that financial (technical) education of CEOs does (not) affect ICFS. The results explain that the role of the CEO's education in ICFS is highly significant during the crisis period. The robustness test depicts that the influence of financial education on ICFS is less (more) for group-affiliated and large-sized firms (stand-alone and small-sized firms). Further, the CEO's education is significantly associated with corporate investment decisions.

Research limitations/implications

Due to the unavailability of the CEO's compensation data for the selected sample, future research could explore the impact of CEO's education with respect to CEO's compensation on ICFS.

Practical implications

First, the authors find that financially educated CEOs affect ICFS; therefore, firms should take care of CEO's education during recruitment of CEOs. Second, lending agencies should also consider the educational background of the CEO before approval of funding to make it safe. Third, investors should keep in mind the educational background of the CEO for the growth of their investment as it may be easier for financially educated CEOs to borrow from the market at the time of requirement.

Originality/value

This study contributes to the existing literature by providing empirical evidence through analyzing the impact of a CEO's education on ICFS in the context of India. This study is very unique in itself as it uses the sample of manufacturing sectors of India, which are growing very fast and attracting global investors to create a global hub of manufacturing in India. This study also considers different types of education such as financial and technical education of CEOs in the context of a developing economy like India. This study made its findings robust across company characteristics and periods based on the financial crisis.

Details

International Journal of Managerial Finance, vol. 17 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 6 February 2017

Syed Kashif Raza Zaidi, Cassy Daniels Henderson and Gaurav Gupta

The purpose of this paper is to examine factors that affect the adoption of an electronic tax filing system in an emerging economy. Using the theory of planned behavior…

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Abstract

Purpose

The purpose of this paper is to examine factors that affect the adoption of an electronic tax filing system in an emerging economy. Using the theory of planned behavior, the technology acceptance model (TAM), the information systems success model (ISSM), and Hofstede’s cultural values as the theoretical basis, this paper examines the influence that computer skills (CS), perceived ease of use (PEoU), perceived usefulness (PU), information systems quality, and espoused national culture have on the adoption of an electronic tax filing system in an emerging economy.

Design/methodology/approach

A survey was used to collect the data from individuals who e-filed theirs or someone else’s (individual and/or business) income taxes using government or private vendor websites. Snowball sampling technique is used to collect the data. A total of 201 usable questionnaires were analyzed.

Findings

Results indicate that PEoU and PU have a positive impact on user satisfaction (US), and higher US is linked to higher intentions of adopting online tax filing. Results show that high-power distance positively influences US.

Practical implications

The study provides insight for policymakers in emerging economies involved in diffusion of technology decisions. Considerations for requisite CS, perceptions of usefulness and ease, and culture should be included in the diffusion process.

Originality/value

This paper provides evidence supporting the predictability of TAM and ISSM in technology adoption. In addition, the study examines the moderating effect of culture on technology adoption. To the best of the authors’ knowledge, this is the first study to develop and test a holistic technology adoption model in context of a multicultural and emerging economy.

Details

Journal of Accounting in Emerging Economies, vol. 7 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

Case study
Publication date: 11 August 2020

Sandhya Bhatia, Gaurav Gupta and Arindam Tripathy

Recognize the interest groups of the business as stakeholders and shareholders. Understand the role of strategic corporate social responsibility (CSR) in attaining…

Abstract

Learning outcomes

Recognize the interest groups of the business as stakeholders and shareholders. Understand the role of strategic corporate social responsibility (CSR) in attaining competitive advantage for the firm. Apply the techniques of financial statement analysis such as common-sized financial statements and ratio analysis. Analyze the overall financial position of the company such as its liquidity, solvency and profitability position. Evaluate the appropriateness of various CSR activities given the size of the company, its business model and financial position. Create a suitable CSR policy draft incorporating the critical elements of a CSR policy that enables the firm to operationalize it and fulfill the disclosure norms.

Case overview/synopsis

The management of Ball Industry Limited (BIL) had overlooked the mandatory requirement of CSR policy formulation. The company had not yet spent anything on CSR since the regulation had come into force. The company’s financial position was not healthy. Still, it fell under the regulatory clause as a borderline case and must spend 2% of its average three years’ profit on CSR activities. The company had previously ignored the requirement of formally drafting a CSR policy and deciding about the actions it might want to carry out. Now that the regulator had started sending show-cause notices to several companies who had not yet begun CSR, BIL was under immense time pressure to draft its CSR policy and initiate the relevant CSR activities. Emily, the chief operating officer of BIL, was assigned the task of preparing the blueprint of the CSR policy of the company and made it available for discussion in the upcoming meeting. The task at hand was to formulate a sound CSR policy under the constrained financial state considering its strategic planning, including the SWOT analysis, competitive environment and the overall general market and economic conditions. She submitted that rather than a vanilla CSR activity, strategic CSR would support the firm to differentiate itself from competitors. She was struggling to formulate a CSR strategy that could achieve both economic and social goals.

Complexity academic level

The case will be most suitable for use in undergraduate and graduate courses.

Supplementary materials

Teaching notes are available for educators only.

Subject code

CSS 1: Accounting and finance.

Details

Emerald Emerging Markets Case Studies, vol. 10 no. 3
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 5 February 2020

Gaurav Gupta and Jitendra Mahakud

The purpose of this paper is to investigate the impact of the macroeconomic condition on investment-cash flow sensitivity (ICFS) of Indian firms and examine whether the…

Abstract

Purpose

The purpose of this paper is to investigate the impact of the macroeconomic condition on investment-cash flow sensitivity (ICFS) of Indian firms and examine whether the effect of macroeconomic condition on ICFS depends on the size and group affiliation of the firm.

Design/methodology/approach

An empirical investigation is conducted using a dynamic panel data model or more specifically system generalized method of moments (GMM) estimation technique.

Findings

Empirical findings postulate that the availability of cash flow influences the investment decisions which depicts that Indian manufacturing firms are internally as well as externally financially constrained. This study finds that good economic condition (period of high GDP growth rate) reduces the ICFS, although this effect is stronger for small-sized and standalone firms than the large-sized and business group affiliated firms. The authors find that macroeconomic condition has a positive and significant effect on investment decisions.

Research limitations/implications

This study has considered only the non-financial sector. The future research could explore the effect of macroeconomic condition on ICFS might be affected by firm other characteristics such as firm age and firm capital structure.

Social implications

The government should provide loan on the low rate to the small-sized firms and standalone firms because it is very difficult for these firms to finance their investment during the bad economic condition (period of low high GDP growth rate).

Originality/value

This study contributes to the existing literature by analyzing the impact of the macroeconomic condition on ICFS as well as investment decisions of the Indian manufacturing firms, which is an unexplored issue from an emerging market perspective. To the best of my knowledge, this is a first-ever study which explores the effect of macroeconomic condition on investment decisions with respect to business group affiliation and firm size.

Details

South Asian Journal of Business Studies, vol. 9 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

Case study
Publication date: 7 November 2017

Shounak Pal, Gaurav Gupta and Indranil Biswas

Entrepreneurship, Strategic management, Management information systems.

Abstract

Subject area

Entrepreneurship, Strategic management, Management information systems.

Study level/applicability

Undergraduate and graduate capstone course in entrepreneurship, strategic management or management information systems courses.

Case overview

This case study of a young technology firm, Codezin Technology Solutions, helps to analyze the challenges faced by such firms in emerging markets. Such markets are characterized by rapid turbulence in the market characteristics. The authors seek to analyze the role of disruptive regulatory changes, resulting in the growth of new startups, in affecting the growth and expansion of such young firms. Codezin was established in 2009 as a bootstrap company, to provide low-cost IT services to Indian small and medium scale enterprises (SMEs). Despite some initial success, it began to run into losses due to poor coordination and improper planning. After a period of struggle, the company stabilized its revenue from services business and expanded to mobile solutions, digital marketing, etc. But then the government of India announced the Startup India initiative at the beginning of 2016 to boost new ventures. Codezin did not qualify as per the government rules and thus failed to use the various incentives offered. Hence, it needs to determine a new strategy to compete with the onslaught of freshly funded startups but with a relative lack of market experience.

Expected learning outcomes

With the case discussion, the students will gain rich insights on technology businesses aimed at SMEs and the impact of changes in the regulatory regime in emerging markets like India. Further, they get to step into the shoes of the co-founders and choose between diversification vs new market development strategies, spurred by market disturbances and thinning competitive advantage.

Supplementary materials

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Subject code

CSS 3: Entrepreneurship.

Details

Emerald Emerging Markets Case Studies, vol. 7 no. 4
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 14 December 2020

Richard G. Brody, Gaurav Gupta and Michael Turner

The purpose of this paper is to examine factors motivating an individual to report a whistleblowing scenario to various stakeholders within a company. This paper examines…

Abstract

Purpose

The purpose of this paper is to examine factors motivating an individual to report a whistleblowing scenario to various stakeholders within a company. This paper examines how four factors (country of origin and the espoused national cultures of masculinity, collectivism and uncertainty avoidance) influence the level of responsibility toward three stakeholders at different levels of hierarchy in an organization.

Design/methodology/approach

Using a case-based approach, this study collects data from 432 accounting students from two different countries. Using regression analysis on the pooled data, this paper provides evidence on how accounting students would behave when facing a whistleblowing situation involving their immediate supervisor.

Findings

This study finds that country of origin and espoused national cultural values influence the individual’s decision regarding whom to blow the whistle.

Originality/value

The study has improved upon the methodological deficiencies of previous studies that rely on Hofstede’s (1980) cultural values in that the paper focuses on the espoused national culture at the individual level.

Details

International Journal of Accounting & Information Management, vol. 29 no. 2
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 15 July 2020

Richard G. Brody, Gaurav Gupta, Angela N. Ekofo and Kehinde Mayokun Ogunade

In this study, the authors examine the issue of corruption in the government institutions of developing countries. Additionally, this study aims to answer the following…

Abstract

Purpose

In this study, the authors examine the issue of corruption in the government institutions of developing countries. Additionally, this study aims to answer the following research question: How do developing countries implement and enforce these anti-corruption policies? Specifically, the authors look at the laws adopted in different developing countries to deal with issues related to corruption.

Design/methodology/approach

The authors use the qualitative approach to examine the causes of recent corruption among government officials in developing countries such as Nigeria, India, the Democratic Republic of Congo and Uganda. A comparative approach was used to compare and contrast the anti-corruption practices of developing and developed countries.

Findings

The findings indicate that corruption is rampant in much of the developing world. On a positive note, the authors have found evidence of actions taken by governments in these developing economies to rapidly deal with issues of corruption. All the countries analyzed in this paper have developed anti-corruption policies and related acts to detect and punish the perpetrators of corruption.

Originality/value

This paper provides a greater insight as to how the anti-corruption policies are formulated and enforced in the developing world. Specifically, the authors provide examples of different emerging countries and their approaches to developing and enforcing anti-corruption policies. This guidance can help others around the world to deal with anti-corruption policies in their countries. Although the authors have learned a lot about the detrimental effects of corruption and laws enacted to combat it, the next step is to examine the processes used by the developing countries to develop these anti-corruption laws and policies.

Details

Journal of Financial Crime, vol. 28 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Case study
Publication date: 20 January 2017

Kenneth M. Eades and Gaurav Gupta

This case is suitable for students just beginning to learn finance principles but is also appropriate to use in courses with experienced students and executives. In…

Abstract

This case is suitable for students just beginning to learn finance principles but is also appropriate to use in courses with experienced students and executives. In January 2008, Delphi Corporation (Delphi) had been in Chapter 11 bankruptcy for more than two years but appeared to be on the brink of approving a plan of reorganization (POR) that would allow it to emerge from bankruptcy with a significantly improved balance sheet. Delphi's POR called for a reduction of the company's leverage by exchanging the debt of the unsecured creditors for a mixture of new debt and new equity. The resulting reduction in interest expense was projected to return Delphi to profitability and make the restructured company a viable going concern. Students take the position of various claimants to explain why that claimant class would or would not vote for the plan.

Details

Darden Business Publishing Cases, vol. no.
Type: Case Study
ISSN: 2474-7890
Published by: University of Virginia Darden School Foundation

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