It is my pleasure to bring you Volume 35, Issue 3, September 2023, of the journal, and to update you on the recent developments. IIMB is celebrating its Golden Jubilee during this academic year, and among the events to celebrate this milestone is the IMR Doctoral Conference (IMRDC) 2024 scheduled on 2nd and 3rd February 2024. We have also planned other content features as part of the journal’s engagement with the Golden Jubilee. IMRDC 2024 is planned as a hybrid model with the facility to attend all sessions remotely. We encourage readers to participate actively in IMRDC 2024. For updates, please visit https://www.iimb.ac.in/imr-doctoral-conference.
As readers would know, as of calendar year 2023, IMR is being published only in digital form. Readers have free access to all articles published in the journal, to read and download, from ScienceDirect® - https://www.sciencedirect.com/journal/iimb-management-review - IMR is also a Gold Open Access journal, with the article processing charges (APC) borne by the Indian Institute of Management Bangalore, on behalf of the authors.
Following is a brief introduction to the contents of this issue.
Andrew Downard, Himanshu Shee, and Ian Sadler draw attention to the importance of supply chain relationships to supply chain success, and hence the need for supply chain relationships to be measured and managed effectively, in “Predicting the success of the supply chain dyadic relationship: A qualitative study of dyads”. They extend existing measurement approaches as they aim to explore and develop key elements of a holistic supply chain dyadic relationship (SCDR) and create a revised measurement tool that can predict a successful dyadic relationship.
The study was premised with the theoretical lenses of transaction cost economics (TCE) and social exchange theory (SET). While TCE ensures a firm’s desire to minimise direct and opportunity cost of exchanges (i.e., transaction cost) in the buying–selling arrangement within a dyad, SET promotes inter-party relationship (i.e., trust, commitment, cooperation and satisfaction) for these transactions to occur in a cost-effective way.
The result of the literature review, the input from the expert panel and the pilot application to four dyads resulted in a new SCDR measurement tool with a number of influences and enhancements. Of particular importance was the inclusion of “culture matching”, which was identified by the expert panel, validated via the literature review and supported by the findings and feedback from the four dyads that undertook the pilot assessments using the new SCDR measurement tool. The enhanced tool would help managers to comprehend the importance of organisational culture and its critical role in predicting the SCDR success.
Internal capital markets (ICM) are a popular way of reallocating capital for conglomerates and business-group-like structures, and can be used both benevolently and opportunistically. In “Using profits to re-estimate efficiency of internal capital markets”, Debarati Basu and Arnab Adhikari investigate the profit efficiency of ICMs comprising firms of Indian business groups and the impact of insider ownership and governance on the net and operating profit efficiency of investing (giver) firms of ICMs. For this purpose, they incorporate a two-stage variable return to scale-semi-oriented radial measure data envelopment analysis (VRS-SORM-DEA) and regression-based methodology. The sample comprises all group firms listed on the Bombay Stock Exchange (BSE) 500 index as of 1st September 2016. The sample period is seven years, from the financial year 2009-2010 to 2015-2016. The final tests are run on a 5-year window, from 2010-2011 to 2014-2015.
This work brings several insights related to the net profit and operating profit efficiencies of the giver and taker firms and the effect of insider ownership and governance on the net profit efficiency of the giver firms.
The analysis indicates that giver firms have lower average profit efficiencies than taker firms, especially for giver firms with weaker governance and monitoring. However, investments made by the giver firms are more efficient when the firm has a higher proportion of insider ownership. In summary, internal capital market investments are efficiency-reducing, particularly for firms where insiders have lesser stakes, i.e., outsiders have higher stakes. These results have both policy and financing implications. They highlight the need for transparency mandates from regulators and caution from lenders and investors of diversely held group firms when assessing the type of group firm and the resulting impact of ICMs.
The objectives of “Investment style consistency and performance of Indian fixed income mutual funds” by Mayank Patel, Supratim Das Gupta, and Vinodh Madhavan are to analyse investment styles of Indian fixed income mutual funds (MFs) and examine style consistency and relationship of style consistency with risk-adjusted fund performance. The authors employ Sharpe’s (1992) return-based style analysis (RBSA) framework to measure style consistency; Clare et al.’s (2019) single and multifactor models to estimate risk-adjusted returns for all the funds; and in line with precedence in the literature, the Pearson correlation coefficient to examine the relationship between investment style consistency and risk-adjusted returns of funds. They use a comprehensive sample of 242 funds across 16 categories over a period from April 2015 to March 2020, to evaluate the performance of the Indian fixed income MFs.
The study’s takeaways are two-fold in nature. First, Indian fixed income MFs exhibit large-scale non-adherence to the stated investment style. Fund managers appear to deviate from the investment style with an objective to generate better risk-adjusted returns, but in reality, fund performance is poor; their securities selection ability fails to improve risk-adjusted returns. Second, a fund’s adherence to investment style is positively associated with better risk-adjusted performance. Investment style and style consistency have considerable impact on fund performance, and investment style consistency is an important tool for performance evaluation of a fund. The results show that maintaining a consistent investment style is a valuable skill in professional asset management. Assessing this skill would go a long way in enabling asset management companies to develop pertinent recruitment, retention and remuneration policies for fund managers. And finally, style analysis is a better method for fund classification as compared to the method based on average duration and the type of securities held.
In “Dynamic market risk and portfolio choice: Evidence from Indian stock market”, Subham Agarwal, Sourish Chakravarti, Owendrilla Ghosh, and Gagari Chakrabarti focus on the role of time-varying market risks in the construction of resilient, well-diversified sectoral portfolios for risk-averse investors in the Indian stock market. Specifically, they explore the dynamics of market risks at the sectoral level and identify sectors that are resilient enough to qualify as potential members of a low-risk portfolio. The variability in dynamic market risks in the wake of major crises such as the financial meltdown of 2007–2008 and the recent pandemic has also been incorporated to get better insight into prudent investment decision.
They use daily data collected from the official website of the BSE on ten sectoral indices for the period of 2006-2021. Sectoral time-varying betas are estimated using multivariate GARCH model. A three-regime Markov switching model explores the movements and a stress index (CMAX) checks whether such risks escalate under crises. Subsequently, the most resilient sectors are identified to construct the minimum-variance portfolio.
The findings suggest that mere consideration of market risk and not taking its variability into account underestimates the risks of investment. Once the market risks are time-varying, judging sectors according to their nature (i.e., aggressive or defensive) does not give us true insight about their market risks. Market risks may be extremely volatile and may be affected by market stress and can escalate the risk of investment. With regime-switching market risks that escalate under stresses, sectors are to be ranked judiciously. Further, being aggressive does not restrict a sector from being included in the lower market-risk portfolio, and on the other hand, investing in an all-defensive asset portfolio does not always help in risk reduction. Such modifications in the concepts and issues are crucial to identify a portfolio that is resilient to market risks, less susceptible to market crashes, and imparts lower losses on the investors, particularly during crises.
Cultural beliefs among stock market participants are not new, and previous research has demonstrated that cultural beliefs influence investor behaviour and market outcomes. In “The effect of Hungry Ghost Festival (HGF) on stock market returns and volatility: An empirical analysis on Asian stock markets”, Wan Mohd Farid Wan Zakaria, Nur Liyana Mohamed Yousop, Wan Muhd Faez Wan Ibrahim, Sharazad Haris, and Syed Khusairi Tuan Azam investigate the effect of the Hungry Ghost Festival (HGF) period (pre, during and post) on stock returns and volatility, of five prominent Asian stock indices. Their study analysed the daily stock return data of Singapore (FTSE Straits Times Singapore), Malaysia (FBM Kuala Lumpur Composite Index), Philippines (Philippines Stock Exchange Inc), Shanghai (Shanghai Stock Exchange) and Hong Kong (Hang Seng Index) from January 2011 to December 2020. They used descriptive statistics analysis, ordinary least square (OLS) regression, and GARCH (1,1) analysis to investigate the effects of returns and volatility on the HGF period. Results from descriptive analysis provide basic summaries of each country’s stock’s average returns and spread. An OLS regression analysis with dummy variables demonstrated the relationship between returns and HGF periods. The GARCH (1,1) test was used to determine the volatility of stock returns.
Over the entire sample period, the average returns show either positive or negative results, close to zero and in non-normal distribution, a common scenario in the stock return series. Shanghai demonstrates the highest average return during the HGF period, whereas Singapore represents the lowest average return. In terms of dispersion, the standard deviations of return are higher during the HGF month than other counterparts signalling the investment is riskier and more volatile. Shanghai records the highest dispersion, and Singapore the lowest. On the other hand, the overall kurtosis of the stock returns is excessive, indicating that the stock returns series follows a leptokurtic distribution (heavy tails). Excluding the Philippines and Shanghai, the kurtosis for all countries spikes during the HGF month, showing that the investment is considered perilous and would experience extreme returns. Applying the OLS, a notable negative correlation between the HGF period and Singapore is identified, suggesting a relatively diminished significance of the HGF's influence. Concerning volatility, the GARCH (1,1) model indicates substantial adverse effects on return volatility for Singapore and Shanghai, with Hong Kong as the exception. Conversely, Malaysia and the Philippines show significant positive effects, indicating varying degrees of return volatility during the HGF, with Malaysia experiencing lower and the Philippines, higher volatility. Finally, the prevailing volatility of daily stock returns maintains consistency across the examined countries and is influenced by preceding shocks. While investment during the HGF might seem to entail increased risk and volatility in certain countries, the available evidence does not explicitly support the assertion that the HGF exerted a significant effect on all the analysed markets.
In “Factors influencing sustainable outsourcing relationship: An empirical investigation into the Indian coal mining industry”, Mousumi Modak, Khanindra Pathak, and Kunal Kanti Ghosh observe that outsourcing is one of the strategic decisions adopted by organisations around the globe in order to stay competitive. But outsourcing has now become more strategy-driven, delivering mutual gains and benefits through long-term relationships, such that the service providers have now become outsourcing partners in terms of increasing the value proposition of products and services of the client firm helping them achieve a stronger competitive position. Under the given scenario, one of the key challenges for the client firms is to manage and administer such outsourcing arrangements with the service providers.
The focus of this study is to identify the critical success factors for developing and maintaining a sustainable relationship between the service provider and the client organisation taking into account the effect of relational risks and also the likely negative consequences; the context of the study is an Indian coal mining organisation (ICMO). The study identifies the effect of a set of antecedents (i.e., service provider lock-in, qualification of service provider, and measurement problem) on service provider's opportunism while maintaining a long-term sustained outsourcing relationship. A structural equation modelling (SEM) approach has been deployed for the empirical evaluation of the hypothesised relationships between the constructs using the responses obtained from the executives of the ICMO.
The results provide empirical evidence towards the fundamental premise that negative and undesirable outcome (opportunism) in an outsourcing relationship can be overcome through proper identification and evaluation of the above-mentioned antecedents while entering into a sustainable long-term relationship with the service provider. Moreover, the findings of the study reveal that although the client managers should primarily focus on the service provider lock-in and measurement problem, due importance should also be given to motivation, goal congruence, and verification of service provider's capabilities associated with the qualification of service provider for maintaining a sustainable relationship. Further, the role of the service provider’s organisation culture in moderating the strength of the linkage between opportunism and the sustainable relationship has also been explored.
In “Impact of intolerance of uncertainty on well-being during COVID-19 pandemic in India: Does practising gratitude and mindfulness help?” Tanusree Dutta, Raina Chhajer, Sudipa Nag, and Swati Dhir preface their study with the observation that uncertainty (a cognitive state wherein an individual is unable to assign meaning to an event) causes fear and impacts the well-being of an individual adversely, and that the COVID-19 pandemic was one such situation that created fear of uncertainty worldwide.
In their study, the authors attempt to empirically explore the impact of intolerance of uncertainty (IU) on well-being and examine the role of mindfulness and gratitude in influencing the relationship between IU and well-being. IU is a cognitive bias that compels individuals to appraise uncertain situations as negative; it influences an individual’s perception and reaction and also affects well-being adversely. To test the hypotheses formulated for the study, data were collected from 283 working professionals. A questionnaire-based survey was used to measure and analyse the path coefficients among IU (prospective and inhibitory anxiety), mindfulness, gratitude, and well-being.
To analyse the data and interpret the results, the study used a variance-based technique, partial least square structural equation modelling (PLS SEM). The findings suggest that IU (both prospective and inhibitory) have a negative impact on well-being. Gratitude and mindfulness practices mediate the relationship between inhibitory anxiety and well-being, but no significant mediation effect was found in the relationship between prospective anxiety and well-being. Gratitude and mindfulness practices proved useful mechanisms to combat inhibitory anxiety. The study suggests that it is important to deal with prospective anxiety in such a way that future-related anxiety can be handled; prospective IU might reflect an approach oriented to uncertainty, in which intolerant individuals collect information and plan ahead to lessen uncertainty anxiety.
With best wishes,
Jishnu Hazra
Editor-in-Chief
IIMB Management Review
E-mail address: eic@iimb.ac.in
