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Case study
Publication date: 27 March 2014

Debjit Roy and Arindam Bandyopadhyay

Inventory management plays a critical role in managing business profitability. Through this case, the participants will understand the role of managing inventory for timely…

Abstract

Inventory management plays a critical role in managing business profitability. Through this case, the participants will understand the role of managing inventory for timely workshop operations. Further, too much inventory can erode business margins and occupy storage space. This case also highlights the selection of an appropriate inventory review policy for managing the spare parts inventory.

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Indian Institute of Management Ahmedabad, vol. no.
Type: Case Study
ISSN: 2633-3260
Published by: Indian Institute of Management Ahmedabad

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Article
Publication date: 9 January 2007

Arindam Bandyopadhyay

The purpose of this paper is to develop a hybrid logistic model by using the inputs obtained from BSM equity‐based option model described in the companion paper, “Mapping…

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Abstract

Purpose

The purpose of this paper is to develop a hybrid logistic model by using the inputs obtained from BSM equity‐based option model described in the companion paper, “Mapping corporate drift towards default – Part 1: a market‐based approach” that can more accurately predict corporate default.

Design/methodology/approach

In a set of logistic regressions, the ability of the market value of assets, asset volatility and firm's leverage structure measures to predict future default is investigated. Next, a check is made as to whether accounting variables and other firm specific characteristics can provide additional significant information in assessing the real world credit quality of a firm in a multifactor model

Findings

From analysis of 150 publicly‐traded Indian corporates over the year 1998 to 2005 it was found that in a volatile equity market like India, one needs to enhance the BSM model with other accounting information from financial statements and develop hybrid models. The results in this paper indicate that a mix of asset volatility, market value of asset and firm's leverage structure along with other financial and non financial factors can give us a more accurate prediction of corporate default than the ratio‐based reduced form model.

Originality/value

The hybrid model developed in this paper allows us to integrate information from the structural model as well as profitability of firms, liquidity risk, other firm specific supplementary information and macroeconomic factors to predict real world corporate distress potential through a multivariate analysis.

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The Journal of Risk Finance, vol. 8 no. 1
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 1 January 2013

Arindam Bandyopadhyay and Sonali Ganguly

Estimation of default and asset correlation is crucial for banks to manage and measure portfolio credit risk. The purpose of this paper is to find empirical relationship between…

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Abstract

Purpose

Estimation of default and asset correlation is crucial for banks to manage and measure portfolio credit risk. The purpose of this paper is to find empirical relationship between the default and asset correlation with default probability, to understand the effect of systematic risk.

Design/methodology/approach

The authors have estimated single default and implicit asset correlations for banks and corporates in India and compare it with global scenario. This paper deduces a simple methodology to estimate the default correlations from the variance of temporal default rates. Next, the asset correlations have been estimated analytically by decomposition of variance equation in Merton's one factor risk model following approaches of Gordy and of Bluhm and Overbeck.

Findings

The authors empirically find a negative relationship between asset correlation and the probability of default using Moody's global corporate data that support Basel II internal ratings‐based (IRB) correlation prescription. However, they do not find any smooth relationship between the probability of default (PD) and asset correlation for Indian corporate. The magnitude of correlation estimates based on a large bank's internal rating‐wise default rates are much lower than what is prescribed by the Basel committee. Thus, the standardized correlation figures as assumed by the Basel Committee on Banking Supervision need to be properly calibrated by the local regulators before prescribing their banks to calculate IRB risk weighted assets.

Originality/value

These correlation estimates will help the regulators, insurance firms and banks to understand the linkage between counterparty default risks with the systematic factors. The findings of this paper could be used further in estimating portfolio economic capital for large corporate exposures of banks and insurance companies.

Details

The Journal of Risk Finance, vol. 14 no. 1
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 21 August 2007

Arindam Bandyopadhyay, Tasneem Chherawala and Asish Saha

This paper is a first attempt to empirically calibrate the default and asset correlation for large companies in India and elaborate its implications for credit risk capital…

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Abstract

Purpose

This paper is a first attempt to empirically calibrate the default and asset correlation for large companies in India and elaborate its implications for credit risk capital estimation for a bank.

Design/methodology/approach

The authors estimate default probabilities and default correlations of long‐term bonds of 542 Indian corporates using rating transitions and pair‐wise migrations over ten year cohorts of firms. Further, the implicit asset correlation from the estimated default correlations and default thresholds are derived using the asymptotic single risk factor approach.

Findings

The authors find evidence that default correlations are time variant and vary across rating grades and industries. The highest correlations are observed between companies within the same rating grades (systematic risk impact) and within the same industry (industry specific impact). More interestingly, significantly smooth monotonic relationship between the probability of default (PD) and asset correlation as prescribed by the Basel II IRB document (2006) are not found. Moreover, it is found that the asset correlation range for Indian corporates do not match with what is prescribed for corporate exposures by BCBS.

Originality/value

The authors address the dilemma implied by the negative relationship between PD and asset correlation as suggested by BCBS IRB formula and other research for developed economies with estimates of asset correlation for and emerging market like India and demonstrate its implications on the estimation of credit risk capital.

Details

The Journal of Risk Finance, vol. 8 no. 4
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 9 January 2007

Arindam Bandyopadhyay

The purpose of this article is to discuss a Black‐Scholes‐Merton (BSM)‐based market approach to quantify the default risk of publicly‐listed individual companies.

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Abstract

Purpose

The purpose of this article is to discuss a Black‐Scholes‐Merton (BSM)‐based market approach to quantify the default risk of publicly‐listed individual companies.

Design/methodology/approach

Using the contingent claim approach, a framework is presented to optimally use stock market and balance sheet information of the company to predict its probability of failure as well as ordinal risk ranking over a horizon of one year.

Findings

By applying the methodology, yearly estimates of the risk neutral and real probability of default for 150 Indian corporates from 1998 to 2005 were constructed, that give up‐to‐date point‐in‐time perspective of their risk assessment. It was found that option model can provide ordinal ranking of companies on the basis of their default risk which also has good early warning predictability.

Originality/value

The option‐based default probability estimation may be an innovative approach for measuring and managing credit risk even in the emerging market economy. The asset value model developed in this paper based on the BSM model can facilitate the Indian banks as well as investors to get an early warning signal about the company's default status.

Details

The Journal of Risk Finance, vol. 8 no. 1
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 1 May 2006

Arindam Bandyopadhyay

This paper aims at developing an early warning signal model for predicting corporate default in emerging market economy like India. At the same time, it also aims to present…

6187

Abstract

Purpose

This paper aims at developing an early warning signal model for predicting corporate default in emerging market economy like India. At the same time, it also aims to present methods for directly estimating corporate probability of default (PD) using financial as well as non‐financial variables.

Design/methodology/approach

Multiple Discriminate Analysis (MAD) is used for developing Z‐score models for predicting corporate bond default in India. Logistic regression model is employed to directly estimate the probability of default.

Findings

The new Z‐score model developed in this paper depicted not only a high classification power on the estimated sample, but also exhibited a high predictive power in terms of its ability to detect bad firms in the holdout sample. The model clearly outperforms the other two contesting models comprising of Altman's original and emerging market set of ratios respectively in the Indian context. In the logit analysis, the empirical results reveal that inclusion of financial and non‐financial parameters would be useful in more accurately describing default risk.

Originality/value

Using the new Z‐score model of this paper, banks, as well as investors in emerging market like India can get early warning signals about the firm's solvency status and might reassess the magnitude of the default premium they require on low‐grade securities. The default probability estimate (PD) from the logistic analysis would help banks for estimation of credit risk capital (CRC) and setting corporate pricing on a risk adjusted return basis.

Details

The Journal of Risk Finance, vol. 7 no. 3
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 1 November 2011

Arindam Bandyopadhyay and Asish Saha

The primary objective of the paper is to demonstrate the importance of borrower‐specific characteristics as well as local situation factors in determining the demand prospect as…

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Abstract

Purpose

The primary objective of the paper is to demonstrate the importance of borrower‐specific characteristics as well as local situation factors in determining the demand prospect as well as the risk of credit loss on residential housing loan repayment behavior in India.

Design/methodology/approach

Using 13,487 housing loan accounts (sanctioned from 1993‐2007) data from Banks and Housing Finance Cos (HFCs) in India, this paper attempts to find out the crucial factors that drive demand for housing and its correlation with borrower characteristics using a panel regression method. Next, using logistic regression, housing loan defaults and the major causative factors of the same are examined.

Findings

In analyzing the housing demand pattern, some special characteristics of the Indian residential housing market (demographic and social features) and the housing loan facility structure (loan process, loan margin, loan rate, collateral structure etc.), that have contributed to the safety and soundness of the Indian housing market have been deciphered. The empirical results suggest that borrower defaults on housing loan payments is mainly driven by change in the market value of the property vis‐à‐vis the loan amount and EMI to income ratio. A 10 percent decrease in the market value of the property vis‐à‐vis the loan amount raises the odds of default by 1.55 percent. Similarly, a 10 percent increase in EMI to income ratio raises the delinquency chance by 4.50 percent. However, one cannot ignore borrower characteristics like marital status, employment situation, regional locations, city locations, age profile and house preference which otherwise may inhibit the lender to properly assess credit risk in home loan business, as the results show that these parameters also act as default triggers.

Originality/value

This study contributes on the micro side of the housing market in India, since it uses unique and robust loan information data from banks and HFCs. The empirical results obtained in this paper are useful to regulators, policy makers, market players as well as the researchers to understand housing market demand and risk characteristics in an emerging market economy such as India.

Details

Journal of Economic Studies, vol. 38 no. 6
Type: Research Article
ISSN: 0144-3585

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Available. Open Access. Open Access
Article
Publication date: 30 April 2016

Jaruwan Songsang, Kamonchanok Suthiwartnarueput and Pongsa Pornchaiwiseskul

The purposes of this paper are 1) to develop model of long term financial health for logistics companies in Thailand 2) to identify factors that determine long term financial…

352

Abstract

The purposes of this paper are 1) to develop model of long term financial health for logistics companies in Thailand 2) to identify factors that determine long term financial stability. Many researchers currently provide factors affecting financial health. Most factors refer to financial ratios, not many non-financial ratios such as age and size have been mentioned. This paper considers both financial and non-financial ratios that affect financial performance of Logistics companies in Thailand. The study has covered some interesting non-financial ratios such as Nationality of Shareholders, type of network in Logistics Company, growth rate (consisted of sales growth rate/profit growth rate/asset growth rate / Liability growth rate) and variable of growth rates. The target group is 110 logistics companies in Thailand enlisted from Department of International Trade Promotion Ministry of Commerce, Royal Thai Government. The group is divided into three categories according to financial health of company; Healthy financial, Unhealthy (Distress) and normal situation. The Multidiscriminant Analysis (MDA) is applied to analyze the differentiations among the three categories. Significant variables from MDA will be used as the independent variables for Multimonial Logistic Regression Analysis (MLRA) to identify factors that determine long terms financial stability. This paper find CF/D, RE/TA, BE/TL, Size, Age, Type of network, Nationality of Shareholders and Number of Shareholders are significant factors determine long term financial stability of Logistics company in Thailand.

Details

Journal of International Logistics and Trade, vol. 14 no. 1
Type: Research Article
ISSN: 1738-2122

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Article
Publication date: 13 January 2025

Pavan Namdeo Ghumare

The purpose of this study is to incorporate a broader set of influencing factors. It is aimed at providing practical insights for policymakers and urban planners to help create…

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Abstract

Purpose

The purpose of this study is to incorporate a broader set of influencing factors. It is aimed at providing practical insights for policymakers and urban planners to help create equitable and resilient urban areas that improve the quality of life for low-income residents.

Design/methodology/approach

This study uses a modeling approach that integrates metropolitan open data to quantify housing expenses. This model evaluates housing affordability by incorporating 30 different criteria that impact household affordability, allowing for a more comprehensive analysis. It adopts a multidisciplinary approach, considering economic, social and environmental factors in assessing urban housing dynamics, thereby providing a holistic understanding of the complex factors that influence affordability.

Findings

The research shows that considering multiple factors, including accessibility costs, gives a more accurate measure of housing affordability. Applying the model to Pune reveals the complexity of affordability issues beyond just income and housing costs. The model provides valuable insights for both academic understanding and practical urban housing strategies.

Originality/value

The study’s originality lies in its multidisciplinary approach to provide a more holistic assessment of housing affordability. The research offers a novel method of analyzing housing affordability, which is often overlooked in traditional models. The findings hold value for urban planners and policymakers, providing them with actionable data to support equitable urban development and improved housing conditions for low-income populations.

Details

International Journal of Housing Markets and Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8270

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Article
Publication date: 9 November 2020

Pavan Namdeo Ghumare, Krupesh A. Chauhan and Sanjaykumar M. Yadav

The purpose of this paper is to provide affordable housing to economically weaker section (EWS). The enormity of India’s housing affordability problem has led the authors to study…

381

Abstract

Purpose

The purpose of this paper is to provide affordable housing to economically weaker section (EWS). The enormity of India’s housing affordability problem has led the authors to study and analyze the criteria delaying an affordable housing for EWS. The issues affecting supply and demand for affordable housing in Indian urban areas for EWS are analyzed.

Design/methodology/approach

The judgment sampling is used among housing and planning experts working in five different sectors, including local authorities, housing developers, housing sectors, town planning and property/affordable housing consultants. The study has established the problem and acknowledged 30 factors behind it. A total of 349 questionnaires were administered among the housing experts in 4 states of India. Descriptive statistical method was used to determine the significance of criteria.

Findings

A complete structure of criteria signifying housing affordability, established by the authors, is validated and analyzed in this paper. The questionnaire surveys were conducted with housing and planning experts across the four states of India to determine household perceptions on the criteria contributing to housing affordability and to rank these criteria according to their importance. The study establishes that the experts’ views on this issue differ insignificantly across different states of India, while they differ in certain levels depending on the urban area.

Practical implications

To build successful societies for the future, the authors wish to draw closer on affordability issues for EWS. The suggestions prominent information to investors, and real estate firms, which could assistance ecological growth of housing projects that are affordable.

Originality/value

Based on the examination of the ranking and greatness of housing criteria, this paper further suggests possible developments for EWS in India.

Details

International Journal of Housing Markets and Analysis, vol. 14 no. 4
Type: Research Article
ISSN: 1753-8270

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