Editorial
Greetings from the Editor’s desk! It is my pleasure to bring you the first issue of the journal after having taken over as the Editor-in-Chief . I take this opportunity to thank the outgoing Editor, Professor Ashok Thampy, and look forward to building on the strengths of the journal as we move forward.
Volume 33, No. 2, the June 2021 issue, carries its regular complement of articles covering a mix of areas. Following is a brief description of the contents.
Does the availability of sector-specific credit matter for the development of a specific sector at the local level? Seeking to answer this question, Ashok Thampy and Mrityunjay K. Tiwary, in their paper “Local banking and manufacturing growth: Evidence from India”, examine the development of the manufacturing sector in a local area and the availability of credit to the manufacturing sector, using data from the districts of India. They also focus on how human capital in the local area impacts the relationship between financial development and manufacturing growth in the area. The study uses panel dataset of 531 districts from 23 states, for a 10-year period from 2000 to 2009, and a generalised method of moments model to estimate the relationship between manufacturing output, financial development, and human capital.
The results provide evidence that sector-specific lending at the local level is positive for the growth of manufacturing at the local level. Also, bank lending and human capital act as substitutes to each other in the growth estimates, suggesting that the development of human capital in the local area reduces the constraints of inadequate financial development on the growth of manufacturing. The study also finds that the availability of credit in a broader geographic region of the state does not have a significant effect on manufacturing growth at a local level. These findings highlight the importance of the development of financial infrastructure in the local region for the growth of the local economy. Policies to increase manufacturing output at the local level would do well to pay attention to the development of a geographically dispersed banking sector with sector-specific lending capabilities.
What is the impact of redistribution of tax resources and equalisation programmes on the growth potential of regions under “fiscal federalism”? In “Horizontal devolution: Have the finance commissions delivered?”, P K V Kishan and Pavneet Singh analyse the performance of the Finance Commissions (FCs) in India (which serve as the institutions for central fiscal transfers to state governments) on their stated objectives of achieving equity and efficiency in the inter se shares to states via their respective horizontal devolution mechanisms. To gauge the performance of FCs on equity considerations, the authors studied the trends in the progressivity of the horizontal devolution formulas recommended by the last four FCs – the EFC (2000–2005), the TFC (2005–2010), the THFC (2010–2015), and the FFC (2015–2020). Fiscal efficiency analysis was conducted on the latest two FCs – the THFC and the FFC, with primary focus on the impact of their recommendations on the “fiscally efficient” states.
The results of the analyses indicate that the objectives of equity and efficiency have not been adequately addressed in the FC recommendations, Further, the frequent change in criteria and the weights assigned to them seem to preserve the status quo in the inter se devolutions, but they hardly seem efficient in actually achieving the equity and efficiency objectives of the FCs. Further, the FFC’s move away from the criteria of fiscal discipline and/or tax effort does not seem justified. Thus, while designing a formula for horizontal devolution, the subsequent finance commissions would need to adopt an objective approach and ensure that the fiscal distance between the states is bridged, states are rewarded for their fiscal performance, and no provisions are stipulated, which could result in perverse incentives for states to compromise on efficiency in fiscal behaviour.
Using the smartphone as stimulus, in the paper, “The mediating role of brand credibility on celebrity credibility in building brand equity and immutable customer relationship”, Ramendra Pratap Singh and Neelotpaul Banerjee examine how celebrity credibility affects the customer-based brand equity and relationship continuity expectation. Their conceptual model is based on two models: the associative network memory model and brand signalling theory. The study considered five smartphone brands endorsed by different celebrities. The participants in the study were selected from 10 major mobile phone retail outlets and two shopping malls with highest footfalls in a major city in West Bengal, India.
The study results suggest that a credible celebrity helps improve brand equity and would support establishing a strong continual relationship with the brand. This relationship expectation continuity is stronger in the case of new users. The study finding helps marketing managers understand the role of credible celebrity endorsers in addition to brand credibility and suggests that to develop formidable brand equity and sincere relationship building with consumers, the association of a credible celebrity with a credible brand has to work together. The finding also suggests that new users are greatly influenced by celebrity advertisements in case of building strong relationships with the credible brand.
Gold and silver are considered safe-haven assets, but their price changes are not always unidirectional and proportional. In “A study of excess volatility of gold and silver”, Parthajit Kayal and S. Maheswaran examine and compare the volatility of both metals. They examine the volatility of gold and silver using the extreme value estimator RS proposed by Rogers and Satchell and the VRatio proposed by Maheswaran et al. in multiple-days’ framework and bootstrap simulation. They find persistence of excess volatility in the gold spot price data that engenders excessive path dependence, whereas they find this is not the case with silver. They capture the increasing volatility using Binomial Markov Random Walk (BMRW) model and allowing for strong form of path dependence. They use a new measure of risk, the Expected Lifetime Shortfall (ELS) ratio, to test for the presence of mean reversion in asset prices. They draw implications of the estimated results on volatility to suggest the choice of gold or silver in portfolio design and hedging strategies.
The results suggest that there is a strong mean-reverting characteristic in the price movements of gold, namely, when the prices are low, there is a tendency to move higher, which makes it a better investment choice than silver, in the medium term. The mean-reverting characteristic is not significant in silver, that is, if prices move up then they are more likely to stay up for a relatively long time, and vice versa. Hence, from an investor perspective, the portfolio should consist of gold rather than silver.
The primary objective of the study in “Competence and efficacy of commodity futures market: Dissection of price discovery, volatility, and hedging”, by Bhabani Sankar Rout, Nupur Moni Das and K. Chandrasekhara Rao is to identify the price discovery mechanism associated with the commodity derivatives market. The authors focus on the net volatility and the downside potential of select commodities in the agricultural commodity derivatives market. In effect, they examine whether the agricultural commodity market is efficient enough to discover the spot prices and help in risk management. They also examine the hedge ratio and the hedging efficiency for select agricultural commodities, and the existence and the direction of volatility spillover.
The analysis is based on near-month contracts for the period January 2010–December 2015, for five agricultural commodities, namely, chana, chilli, jeera, soya bean, and turmeric. Daily time series data were collected for both spot price and futures price from various exchanges. The study uses cointegration test, Granger causality test, and vector error correction (VEC) model to assess the price discovery mechanism, and the speed and direction of adjustment of the markets. Hedging efficiency is examined using ordinary least squares regression. An EGARCH model is used to assess the net risk in each market. A bivariate EGARCH model is used to capture the volatility spillover, and value at risk is used to estimate the downside risk.
The price discovery process—as evidenced by the results of the cointegration test, causality test, and the VEC model—reflects the inefficiency of the futures market in determining prices in the spot market because the spot takes the lead for the selected agricultural commodities, except turmeric. Further, the lead-lag relationship varies from commodity to commodity. Additionally, downside risk exists in both the markets, and volatility is transmitted from the spot market to the futures market. The agricultural commodity futures market is found to lack hedging efficiency. The findings related to market dynamics could be useful to investors and regulators.
In “Exploring the influence of supportive supervisors on organisational citizenship behaviour: Linking theory to practice”, Kuldeep Kaur and Gurpreet Randhawa investigate the relationship between supervisory support and organisational citizenship behaviour (OCB) in the Indian context and the mediating role played by participation and job involvement in explaining this relationship. In particular, they try to find the effects on the strength of association between supervisory support and organisational behaviour if the employer encourages participation and employees feel involved in their jobs, i.e., whether the presence of participation and involvement along with supervisory support leads to an enhanced level of OCB.
Data were collected from 509 employees working in large-scale food processing companies in the state of Punjab and were analysed using structural equation modelling and bootstrapping procedure. The findings reveal that supportive supervisors play a significant role in developing OCB; and participation and job involvement partially mediate the relationship between supervisory support and organisational citizenship behaviour. When employees are given a chance to participate, they reciprocate by indulging in a higher level of OCB; also, the employees exercise higher OCB when they are highly involved in their jobs and the supervisors are supportive.
By building a supportive culture which encourages job involvement and participation in the organisation, the management can create a healthy and positive bond with its employees. Organisational policies and practices should be reinforced to encourage the positive perceptions of employees towards their workplace as well as management.
Using the case-ecosystem of ABC House, an organisation which functions as a worker cooperative society and runs a chain of restaurants, Soumya G. Rajan and Bino Paul G. D. explore key concerns on dignity raised by social theorists, in their paper, “Searching for answers on dignity, knowledge and engagement in a worker cooperative society”. The study seeks to explore the interplay of knowledge and meaningful work in enhancing an individual’s self-worth which leads to cooperation and engagement. It also attempts to derive inferences on the translation of meaningful work in the context of dignity within the organisational structure.
The case ecosystem of ABC House accounts how consciously dignity was embedded within the structural prerequisites of an organisation through meaning-making processes, value systems and knowledge structures. The study brings to light that the combined existence of inclusion through socialisation leads to the creation and nurturing of engagement in the knowledge structure and brings in dignity.
I look forward to readers’ inputs on the contents of this issue. Readers may also access the journal at https://www.sciencedirect.com/journal/iimb-management-review.
With best wishes,
Jishnu Hazra
Editor-in-Chief
IIMB Management Review
E-mail address: eic@iimb.ac.in