It is my pleasure to introduce Volume 34, No. 2, the June 2022 issue of IIMB Management Review (IMR) and to share news of the progress of the journal.
Readers would be happy to know that IMR is now a Gold Open Access journal, supported by the Indian Institute of Management Bangalore (IIMB). The digital version of the journal is available free of cost for use and download to all readers. Published articles are free for readers to access and download from ScienceDirect® - https://www.sciencedirect.com/journal/iimb-management-review. With the flip to Gold Open Access, we will be phasing out the print version of the journal by the end of this year. Hence, as of calendar year 2023, IMR will be available in digital form only, with free reader access to all published articles from ScienceDirect®. The print issue, however, will be available for subscription for the year 2022. We understand that this move will enable a wider range of our readers to access and benefit from the journal. We invite you to view more details about the journal at https://www.journals.elsevier.com/iimb-management-review/.
In the first article to feature in this issue, “The interaction between technology, business environment, society, and regulation in ICT industries”, Subhashish Gupta begins by observing that among the most prominent businesses today are firms belonging to the information and communication technology (ICT) industry. However, while ICT businesses bring many benefits, they also cause concern about issues of privacy and manipulation, among others. Changes in technology are driving new forms of businesses to develop, which are in turn being regulated by the government, either directly through regulatory agencies or through laws. The interaction between the three is in turn affecting society. The role of technological advances in communication (e.g., cellular mobile, 5G, spectrum allocation) and in computational advances (e.g., cloud, Internet of Things, big data, artificial intelligence) along with developments in the business environment (e.g., disruption, convergence, Industry 4.0) and the regulatory environment (e.g., competition law and market regulation) and how these together impinge on society are explained in the model developed by the author.
The article draws attention to the trade-off between too strict a regulatory regime that might kill the benefits of the innovative process and too lax a regime which may lead to monopolisation. The challenge is to find the right mix. Businesses have to pay heed to the concerns of governments and the society in which they operate. In their turn, governments, regulators, and members of the civil society have to stay abreast of the developments in technology and have some understanding of the digital economy. Societies have to face the challenges of the dynamic interaction between technological advances, their use in new business models, their effects on society, and efforts to regulate them.
The second article in this issue dwells on the rise of electronic (e-) commerce, in particular e-tailing or electronic retailing, as one of the major impacts of ICT, with India being ranked among one of the most attractive countries for e-tailing. Observing that the growth of e-tailing is more readily visible in metropolitan cities when compared to non-urban regions, especially in large developing countries where significant disparities exist in the socio-economic development of regions as well as access to technologies, in “How attractive is a locale to e-tailers? Introducing a regional e-tailing adoption model for non-metropolitan India”, Shankhadeep Banerjee and Priya Seetharaman explore the demographic factors that can explain the regional variation in e-tailing adoption and attempt to build a simple regional e-tailing adoption model.
Combining the diffusion of innovations theory and the ability-motivation-opportunity framework of consumer behaviour, the authors hypothesise relationships between various regional-level people-related attributes and e-tailing adoption behaviour, and empirically validate those using ordinary least squares and Poisson regression. To gauge e-tailing levels of different regions, primary data were collected from India Post on packages delivered in April–May 2016 across Indian districts for a large e-tailer operating in India. Results demonstrate a significant influence of regional-level technological access, learning readiness, personal transport availability, and economic status, but no impact of financial services access on e-tailing adoption.
This research could spark interest among academia, government, and industry to work on understanding variations in e-tailing and overall e-commerce adoption in different regions, and lead to further fine-tuning of the regional e-tailing adoption model.
Researchers have converged on the need for trade union organisations to change their strategies, increase their effectiveness, and enhance their organisational capabilities, and have also noted that various professional and managerial skills and competencies are being actively acquired and manifested by union officials. Against this background, in “Managerial competencies for trade union officials in India: The key to union effectiveness”, Shankha Shuvra Misra and Piyali Ghosh adopt an interdisciplinary approach to develop a mixed model for union officials that could be linked with their performance and would contribute to union effectiveness.
On the basis of classical competency theories, they apply the analytical tools of competency modelling upon the roles of union officials in the Indian context. Scrutinising the professional skills required in union officials and matching them with the traits of successful student activists, they identify four competencies: result orientation, aligning critical constituencies, networking skills, and effective feedback sharing. Their exploration of these four competencies with 36 union officials across five independent trade unions in India proved that all four were positively associated with higher performance of these officials. The qualitative investigation enunciates the following performance measures for union officials: frequency of nomination, speed of closure of issues, number of positive changes, extent of consultativeness, and ability to develop team. They also project that adopting a combination of competencies could help resolve the individualist-collectivist conflict encountered in the professionalisation of unions. The authors render an actionable way to enhance union effectiveness and project that the competencies of result orientation, aligning critical competencies, and networking skills would improve collectivisation efforts in the face of future challenges.
Ishani Chaudhuri and Parthajit Kayal comment in “Predicting power of ticker search volume in Indian stock market” that predicting movements of stock market variables, particularly stock returns, is one of the most heavily researched areas in finance. In the present “digital age” there is a growing recognition of the predictive value of data collected over digital platforms. Search engine traffic i.e., frequency of an online search is one valuable repository of such data. Online search behaviour, particularly ticker symbol searches for different stocks can serve as a reasonable proxy for investor sentiment. In their study, they attempt to test the validity of online ticker searches for a predefined set of firms as a proxy for the investor sentiment in the market. They use search engine data to investigate the predictive power of search engine traffic with respect to abnormal returns and trading volumes for the Indian financial market, particularly the stocks contained in the NSE Nifty 100 index as of February 1st, 2020. The data employed in this study are obtained from CMIE ProwessIQ and Google Trends.
They observe that in contrast to the common findings, ticker search volumes do not exhibit any predictive value for future excess stock returns. Further, they find a weak but significant positive effect of ticker search volumes on trading volume with a 2-week lag. While confirming that the Indian financial market is efficient, they alert investors from possible misleading insights arising from search volume and stock returns related studies. They observe that predicting power of search volume is very limited in the equity markets especially in a major financial market such as India. The lack of predictability can possibly be explained by breaking down the composition and behaviour of stock market investors in India, analysing their risk averse tendencies, and accounting for noise traders. The results of this study could have important implications for the various stakeholders in Indian financial markets.
The corporate debt problem, witnessed globally, has seen distressed corporates facing difficulties in maintaining their working capital, which in turn causes shortage of production. On the other hand, when a distressed corporate fails to repay its loans, it results in non-performing loans (NPLs) for banks. In Bangladesh, following widespread corporate distress, the central bank, Bangladesh Bank, introduced the debt restructuring programme in 2014, an out-of-court restructuring programme in the form of “corporate debt restructuring”, to prevent corporate bankruptcies and to boost bank stability. In “Regulator-initiated corporate debt restructuring: Evidence from Bangladesh”, Saibal Saha Sunny and Cheng-Tao Tang investigate the impact of the regulator-initiated corporate debt restructuring (RCDR) on bank stability by the difference-in-differences (DID) method. The differential effect of outcome variables (NPL, Provision, Z-score) was investigated between two groups of banks, one that came under the RCDR policy and the other that did not. Bank level datasets were collected from the Bangladesh Bank. Macro level datasets were taken from the database of the World Bank world development indicators. The main sample was a balanced panel dataset of 47 commercial banks with 282 observations over the years 2012 to 2017. Among the 47 banks, 22 banks restructured their debt, which is why they were considered treatment banks in this model. The other 25 banks were control banks, as they were not affected by this policy. To measure the RCDR effects, the total sample was split into two time periods: years 2012 and 2013 were considered as the “before policy implementation period”, and the period from 2014 to 2017 as the “after policy period”.
In contrast to other research that predicted an increase in the stability of treatment banks due to the direct benefit of lower provisioning, this study finds that the stability of the participating banks decreased to 52% with the implementation of the RCDR policy, while both NPL and Provision had decreased following the genesis of RCDR. Hence the evidence in this case does not support the claim that debt restructuring can improve participating banks’ stability. This research, therefore, provides potential new insights into the debate on the effectiveness of debt restructuring on bank performance.
Loss given default (LGD), as Arindam Bandyopadhyay explains, is an estimate of the proportion of loan outstanding that a bank is going to lose if default takes place. LGD can be estimated based on the historical loss experience of the bank in recovery in the event of default. In “Loan level loss given default (LGD) study of Indian banks”, Arindam Bandyopadhyay empirically examines critical factors that drive loan recovery rate in Indian banks. The article is an attempt to understand the LGD statistics, their temporal pattern and key factors that contribute to loan losses in banks in emerging countries such as India. A more conservative loan facility level economic LGD is arrived at using internal non-performing assets (NPA) recovery data of commercial banks. Such an economic LGD estimation method considers yearly recovery cash flows, cost of recovery proceedings, as well as the time value of money. It reveals real estimates of loan losses and their relation with haircut security margin, collateral categories and other important factors related to loan recovery. Accordingly, this method attempts to determine LGD variations across loan type, security type, as well as banking group. A multifactor based LGD predictor model has also been worked out by the author based on economic LGD estimates for commercial loans. Finally, he investigates LGD trends over various macroeconomic cycles and identifies its linkage with the corporate default rate.
A historical loss analysis of 12 banks and financial institutions over a 20-year time period was considered for the study. The study finds that banks have better recoveries if loans are settled through better and timely negotiation after arriving at a compromise. Moreover, higher collateral margins and availability of better security lead to better recoveries and lower LGD. Bank loan recoveries are higher (hence low LGD) in case of fund-based facilities, higher collateral margins and for assets backed by more liquid collaterals. Further, regional factors also significantly influence LGD. Loss severity is higher in those cases where loans have defaulted due to systematic reasons than due to borrower specific problems.
The findings of the study would enable the banks as well as policy makers and auditors to understand the importance of LGD and derive benchmark estimates for calculation of expected credit loss as well as credit risk regulatory capital. The facility level multivariate regression based LGD rating model developed in this article may be used by banks to predict future losses for evaluating recovery risk of a standard loan facility.
In “Capital returns and currency value: The contrasting key drivers of foreign portfolio investments in Sub-Saharan African economies”, Samson Edo and Hilary Kanwanye investigate the role of capital returns and currency value in determining foreign portfolio investments in the Sub-Saharan African economies where appreciable financial reforms have taken place, and capital markets are effectively operational. The study employs the methodologies of auto-regressive distributed lag (ARDL) and vector error correction model (VECM). Five economies in Sub-Saharan Africa (South Africa, Nigeria, Cote d’Ivoire, Mauritius, and Ghana) are selected based on data availability, and investigated over the period 2000Q1–2018Q4 (380 quarterly observations).
The study revealed the contrasting roles of capital returns and currency value in determining foreign portfolio investments of Sub-Saharan African economies. Capital returns exerted significant positive impact, while the impact of currency value was indicated to be significantly negative in both ARDL and VECM estimations. Financial openness played a positive role, though not significant enough to qualify as a key driver of foreign portfolio investments. Inflation tended to impair the investments. In order to further enhance the positive impact and reduce the negative impact of variables, policy support is needed. Some policy recommendations that emerge from this study include reduction in capital gains tax, strengthening the legal framework of property rights, allowing exchange rate to float within reasonable limits, and relaxation of stringent official controls in the financial markets.
The IMR Doctoral Conference 2023 is scheduled to be held on 3 & 4 February 2023, and we invite doctoral students from India and abroad to make full paper submissions to the conference, and also attend as delegates. The conference will be held in physical mode at IIMB; we are also considering a limited hybrid model in order to facilitate the online participation of invited speakers, doctoral students, and delegates. For more details about IMRDC 2023 please visit: https://www.iimb.ac.in/imr-doctoral-conference
Best wishes,
Jishnu Hazra
Editor-in-Chief
IIMB Management Review
E-mail address: eic@iimb.ac.in
