Search results

1 – 10 of 60
Article
Publication date: 19 June 2020

Ranjan Das Gupta and Rajesh Pathak

The study examines the role of a country's legal system in predicting the corporate cash holdings using a sample of 18 countries inherited with distinct legal traditions…

Abstract

Purpose

The study examines the role of a country's legal system in predicting the corporate cash holdings using a sample of 18 countries inherited with distinct legal traditions. The central point of the study is the comparative assessment of legal frameworks in shaping the corporate finance policies.

Design/methodology/approach

The authors employ host of regression techniques including dummy variables, panel data regression and Fama–MacBeth regressions to establish the relationship.

Findings

The study results support the idea of “theory of law and finance” that legal tradition is a key factor determining corporate behaviour and policy. In particular, the authors observe that firms operating in civil law systems hold significantly higher cash as compared to their peers from common law systems. Moreover, the authors report that the law system affects the corporate cash holdings through the channels of economic development and shareholder's protection, yet in opposite directions. This is because the authors find that in developed countries where civil law tradition prevails, firms hold reasonably higher cash. Moreover, if the firm belongs to high investors' protection country with civil law traditions, the cash holdings get substantially reduced. Besides, the authors find that the predictability of widely held determinants of cash holdings is not invariant of law traditions, and it holds true also when analysed in conjunction with the financial crisis. Overall, the authors find support for their postulation that corporate cash management policies are likely to be different across legal traditions. The study results are robust to the controls for various firm and country-specific antecedents of cash holdings and to the alternate econometric techniques.

Practical implications

The study findings would encourage the government and firm policymakers and regulators in strengthening the investor protection rights which would further augment the legal system and firm-specific corporate governance mechanisms. This would mitigate agency issues and managers would be forced to undertake investor-friendly financial policies especially corporate cash holdings which would be resulting into shareholder value maximization.

Originality/value

The study contributes uniquely since the existing literature is largely silent on the role that legal tradition of a country has on the cash holdings of its firms.

Details

International Journal of Emerging Markets, vol. 16 no. 8
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 12 March 2019

Ranajee Ranajee and Rajesh Pathak

The purpose of this paper is to examine the cash holding of firms during a crisis and test the widely accepted determinants of corporate cash holding (CCH) for their…

1155

Abstract

Purpose

The purpose of this paper is to examine the cash holding of firms during a crisis and test the widely accepted determinants of corporate cash holding (CCH) for their consistency across periods of crisis, stability and recovery, and across firm categories, in the emerging market context of India.

Design/methodology/approach

The study employs panel data and Fama–Macbeth regression techniques on publicly listed firms during 2001–2015, amid controls for idiosyncratic factors. Further empirical analysis is carried out through the disaggregation of firms based on group affiliation, controlling stake of promoters, financial constraints and firm size.

Findings

The study reports that cash levels are significantly higher during crisis periods for Indian firms. Moreover, promoter holding is observed to be a strong predictor of CCH, which is an addition to the list of predictors in existing literature. Additionally, most of the predictors of cash holding turn out to be consistent through periods of financial crisis, stability and recovery. A firm’s age and growth prospects do not determine cash levels for Indian firms; however, cash-flow volatility, firm size, leverage and non-cash working capital requirements help to determine the cash levels of the firm consistently through different periods. Group-affiliated firms are less likely to engage in cash accumulation as opposed to firms that are large and financially constrained and have high promoter stakes.

Originality/value

The study is unique because it examines the consistency of determinants of cash holding across good and turbulent times and across firm classifications. Moreover, the study uses a broad sample of firms and investigates the topic for a relatively long period in an emerging market setup.

Details

International Journal of Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 16 August 2022

Abhishek Ranga and Rajesh Pathak

The authors investigate the effect of audit quality and analysts' coverage on firms' compliance concerning goodwill impairment testing and disclosure requirements with the…

Abstract

Purpose

The authors investigate the effect of audit quality and analysts' coverage on firms' compliance concerning goodwill impairment testing and disclosure requirements with the Indian Accounting Standard (Ind AS) over the period of 2017–2020.

Design/methodology/approach

The authors conduct univariate analysis and employ pooled ordinary least square (POLS) and Fama–MacBeth (FMB) regression techniques for empirical testing.

Findings

The authors report a substantially higher disclosure score (DS) for firms with superior audit quality and for firms with incidence of analysts' coverage. Moreover, the authors show a positive impact of audit quality on the firm's degree of disclosure. This signifies better compliance by the clients of Big-4 audit firms in the enforcement of standard's mandates. Besides, the results on analysts' coverage indicate that the increasing number of analysts discipline managers in terms of appropriate compliance with disclosure requirements, hence favours the monitoring effect hypothesis for Indian firms. The results are robust to the alternate measures of key regressors, set of firm controls and alternate estimation technique.

Originality/value

The study adds to the knowledge concerning the economic consequences of mandatory disclosures and is possibly the first to investigate compliance related to goodwill impairment disclosure regime under the new Ind AS.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 22 May 2020

Rajesh Pathak, Ranjan Das Gupta, Cleiton Guollo Taufemback and Aviral Kumar Tiwari

This paper aims to examine the weak form of efficiency for price series of four precious metals, i.e. gold, silver, platinum and palladium, using a generalized spectral method.

Abstract

Purpose

This paper aims to examine the weak form of efficiency for price series of four precious metals, i.e. gold, silver, platinum and palladium, using a generalized spectral method.

Design/methodology/approach

The method has the advantage of detecting both linear and non-linear serial dependence in the conditional mean, and it is robust to various forms of conditional heteroscedasticity. The authors use three different rolling windows for the purpose of robustness.

Findings

The authors report weak form of efficiency across metals series for almost all rolling windows. The optimum efficiency for Gold and Palladium is achieved through 250 days rolling window estimates whereas it is 500 days rolling window for silver. Platinum has similar efficiency levels across rolling windows. The degree of efficiency for metal prices is observed to be varying over time with silver market possessing highest levels of efficiency. The efficiency synchronization also varies across rolling windows and metals.

Research limitations/implications

The results reveal that metal markets are efficient for most times implying the low predictability and the low likelihood of earning abnormal returns by speculating in these markets.

Originality/value

The study uses a relatively new statistical technique, the generalized spectral test, to capture linear and non-linear serial dependence. Therefore, the results possess adequate power against departure from market efficiency.

Details

Studies in Economics and Finance, vol. 37 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 22 January 2018

Ranajee Ranajee, Rajesh Pathak and Akanksha Saxena

The purpose of this paper is to test the stickiness of payout policy across times for Indian firms, by identifying the determinants of dividend payout (for amount of…

2101

Abstract

Purpose

The purpose of this paper is to test the stickiness of payout policy across times for Indian firms, by identifying the determinants of dividend payout (for amount of dividends as well as probability of dividends) and examine their predictive consistency through good and bad times, affiliation categories, amid controls for idiosyncratic characteristics. The authors also examine the scantly explored effects of financial constraints on firms’ dividend decisions.

Design/methodology/approach

The authors use various regression models, i.e. panel, Tobit and logit models; and amid control for firm-specific characteristics throughout the analysis.

Findings

The authors observe payout levels on average increasing with time for Indian firms. Further, group firms pay higher dividends compared to standalone firms. Firms’ leverage, profitability, non-promoters holdings, growth prospects and dividend event are apparently the important determinants of payout ratio and are mostly, but not always, consistent through times and firms’ categories, for both the amount as well as the likelihood of dividend payments. Financial constraints have an overall negative impact on dividends with significantly varying magnitude across periods of stability, crisis and recovery. Firms’ age and size are positive and significant factors for dividends level decisions in Indian firms, which is consistent with the life-cycle theory. However, inconsistent size and age effect is observed in determining the likelihood of dividend payment.

Research limitations/implications

This study adds to the growing literature on the changing trends and contributing factors of firms’ dividend payout policy.

Originality/value

This study provides evidence on predictive consistency of payout policy of firms and its determination with the change in the external economic condition.

Details

International Journal of Managerial Finance, vol. 14 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 28 May 2021

Rajesh Pathak, Ranjan Das Gupta and Abhinav Jalali

This study investigates if the widely held predictors of corporate leverage exhibit predictive consistency through times and across countries amidst country…

Abstract

Purpose

This study investigates if the widely held predictors of corporate leverage exhibit predictive consistency through times and across countries amidst country heterogeneities such as legal principles, state of economic development and protection of investors’ rights.

Design/methodology/approach

We employ financial data for 3,197 unique firms from eight emerging and ten developed countries during the years 2001–2017 and use Tobit regression models, a two-step Fama−MacBeth(1973) regression and panel data regression techniques in order to ensure the robustness of estimates.

Findings

We find that firms in the civil French law system exhibit the highest average of a debt (around 27%), whereas firms based in high investors’ protection environment and in developed nations borrow significantly less than their counterparts. Furthermore, among predictors, including a firm's payout ratio, it returns on equity and the cash ratio except the P/B ratio have varying predictability for a corporate debt when firms are classified based on law systems, investors’ rights and the economic scenarios. The crisis period significantly affects the relationship of debt levels with legal systems, investors’ rights and economic development scenario. The author’s estimates are robust to alternate analysis.

Originality/value

This study is unique in its methodological approach and involves a considerably large number of countries and a longer study period for the results to be more generalizable compared to other existing studies.

Details

Managerial Finance, vol. 47 no. 11
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 16 November 2021

Ranjan DasGupta and Rajesh Pathak

The authors investigate whether community-based CEO's attributes, particularly educational attainment, regional and religious affiliation, are direct antecedents of…

Abstract

Purpose

The authors investigate whether community-based CEO's attributes, particularly educational attainment, regional and religious affiliation, are direct antecedents of performance in family-controlled Indian firms. The authors further examine whether CEO's education moderates the linkage of firm performance with regional and religious affiliation.

Design/methodology/approach

The authors employ pooled Ordinary Least Square with fixed effects and Fama-Macbeth regression techniques to test their hypotheses.

Findings

The results reveal that firms with post-graduate CEOs in business and firms with doctorate CEOs, significantly outperform peer firms. The authors also find that CEOs from northern India outperform peer CEOs consistently which emanates from the risk-taking differentials of CEO's across regions. Hindu CEOs also deliver superior return on assets. However, CEO's educational attainment moderates the influence of regional and religious affiliations.

Originality/value

This study is unique as it contributes on the role of regional affiliation of top executives in determining performance which almost remains unexplored in existing literature.

Details

International Journal of Managerial Finance, vol. 18 no. 5
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 29 April 2021

Rajesh Pathak and Ranjan Das Gupta

The authors examine the stability of dividend payout and the consistency in its predictability using sample of firms from 18 different countries amid their prevailing…

Abstract

Purpose

The authors examine the stability of dividend payout and the consistency in its predictability using sample of firms from 18 different countries amid their prevailing heterogeneous formal institutions (such as the legal system, corporate governance), the distinct state of economic development (developing vs developed) and changing times (during the crisis vs the noncrisis periods).

Design/methodology/approach

The authors use tobit regression models with distinct specifications for the authors’ investigations. The authors alternately analyze the study’s results using Fama–Macbeth (FM) (1973) and generalized least square (GLS) regressions.

Findings

The authors show a sharply declining stability in dividend payout with time using DeAngelo and Roll’s (2015) framework. In terms of predictive consistency, the authors report that only a few idiosyncratic factors predict dividends consistently, and these results hold qualitatively true across the robustness analysis. The firm's liquidity appears to be the most consistent predictor of dividends payout, whereas firm's size being on the other extreme. The results signify that the idiosyncratic factors that matter for firm's dividend policy are not country specific. Instead, it reveals commonality of predictors grounded on characteristics of countries such as legal environment, investor's protection, economic state (ES) and economic cycle.

Originality/value

The authors contribute to the dividends literature by providing the evidence of dividend instability through time and disapproving the stylized fact of sticky dividends. Besides, the authors provide international evidence of inconsistent predictability of dividends.

Details

International Journal of Managerial Finance, vol. 18 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 10 April 2017

Rajesh Pathak, Satish Kumar and Ranajee Ranajee

The purpose of this paper is to examine the cross-sectional predictive power and the information content of volatility smirks for future stock returns using single stock options.

Abstract

Purpose

The purpose of this paper is to examine the cross-sectional predictive power and the information content of volatility smirks for future stock returns using single stock options.

Design/methodology/approach

The study uses Fama-Macbeth procedure and portfolio approach to investigate the predictability and informativeness in a setup when options settlement style is changed from American to European.

Findings

The study reports that the volatility smirk of European style options, unlike American style options, predict the underlying cross-sectional equity returns. Firms with steepest volatility smirk underperform firms with flatter volatility smirks, by an average of 3.28 and 4.01 per cent annually for American and European options, respectively. The results are robust to the control of idiosyncratic and systematic risk factors.

Practical implications

The results confirm that a trader with negative information prefers to trade out-of-the-money put options. The more pronounced results of European options designate the trader’s preference to less risky European style stock options. Results are robust and signify the delay of equity market in incorporating information impounded in the volatility smirk.

Originality/value

Very few studies examine smirk and returns relationship and to the best of the authors’ knowledge, no study exists that examine the unique case of change in options style and its role in affecting relationship between smirk and future returns.

Details

Managerial Finance, vol. 43 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 12 June 2020

Yogesh Chauhan and Rajesh Pathak

The paper examines how earnings transparency affects dividend payouts for Indian firms. The authors also explore the channels through which earnings transparency affects…

Abstract

Purpose

The paper examines how earnings transparency affects dividend payouts for Indian firms. The authors also explore the channels through which earnings transparency affects dividend payouts.

Design/methodology/approach

The authors employ panel data estimation with fixed effects to examine the role of earnings transparency on dividend payouts. The authors also use path analysis to explore causation. The paper uses a sample of more than 2000 Indian listed firms, over the period 2001–2016.

Findings

The authors report that firms showing grater earning transparency pay more cash dividend. Their results do not support the signaling hypothesis about the dividend. However, these results provide explicit support to the theory that corporate dividend policy is an outcome of information asymmetry. Moreover, the path analysis reveals the effect of earnings transparency on corporate payout through the financial constraint channel. The results are robust to idiosyncratic controls; alternate measures of payout; alternate models; endogeneity concerns; and the alternate channel of returning money to stockholders.

Practical implications

Managers should also examine earnings transparency while formulating an adequate dividend policy for their firms. This study also helps investors to identify dividend-paying stocks.

Originality/value

This study particularly contributes to the literature examining the effect of earnings quality on dividend payouts through its effect on financial constraints. We, therefore, connect two streams of research that contemplate the relation between accounting-based information variables and dividend payouts and the relationship between financial constraints and dividend payouts. Moreover, using path analysis uniquely, the authors provide evidence on the relative importance of both the direct and the indirect link.

Details

International Journal of Managerial Finance, vol. 17 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

1 – 10 of 60