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Article
Publication date: 12 June 2020

Nemiraja Jadiyappa, Garima Sisodia, Anto Joseph, Santosh Shrivastsava and Pavana Jyothi

The governing role of bank-appointed directors (BADs) on the boards of non-financial firms has a potential to reduce information asymmetry between the firm and non-bank lenders…

571

Abstract

Purpose

The governing role of bank-appointed directors (BADs) on the boards of non-financial firms has a potential to reduce information asymmetry between the firm and non-bank lenders. This should increase the confidence of other creditors in firm activities, thus performing the certification role. Therefore, the purpose of this paper is to empirically examine the certification role of BADs.

Design/methodology/approach

The authors test their hypotheses by using a panel of Indian non-financial firms. Our approach involves examining whether there is a significant difference in the number of different debt sources, the dispersion of debt among different debt sources, and leverage for BAD and Non_BAD Firms. The authors use univariate analysis and multivariate regression models to test the difference.

Findings

The authors find that firms with BADs on their board have (1) access to a higher number of different debt sources, (2) debt distributed evenly among different sources and (3) a higher debt ratio. Overall, our study provides supporting evidence for the certification role that BADs play on the boards of non-financial firms.

Originality/value

The authors contribute to the literature in two aspects. First, to the best of our knowledge, this is the only study that examines the effect of the governing role of banks on the lending decisions of non-bank lenders. Second, our study is associated with the growing body of the governance literature in the emerging markets context by examining the interaction of financial policies and governance in an institutional framework, which is very different from that of the developed world.

Details

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

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Article
Publication date: 4 February 2021

Nemiraja Jadiyappa, Anto Joseph and Garima Sisodia

The purpose of this paper is to empirically examine the impact of the bank-appointed directors on the agency costs of debt by using the idiosyncratic risk of stock returns as a…

347

Abstract

Purpose

The purpose of this paper is to empirically examine the impact of the bank-appointed directors on the agency costs of debt by using the idiosyncratic risk of stock returns as a measure of agency costs of debt.

Design/methodology/approach

We use multivariate panel regression, event study and finally, propensity score matching approaches to test our hypothesis. The robustness of the results is tested for possible endogeneity issues by employing instrumental variable two-stage least square (IV-2SLS) technique.

Findings

Consistent with the efficient monitoring hypothesis, we find a negative relationship between the presence of the bank-appointed director and the idiosyncratic volatility of stock returns among Indian firms. This implies that such firms take up less risky investment projects.

Originality/value

We contribute to the literature from two aspects. First, to the best of our knowledge, this is the first study that examines the monitoring efficiency of creditors' governance. Hitherto, such examinations are done from the shareholders' perspective. Second, we examine the role of the bank-appointed directors on the board of non-financial firms in an emerging world context and find, contrary to the existing evidence in the US context, active monitoring role played by such directors.

Details

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

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Article
Publication date: 2 May 2022

Garima Sisodia, Anto Joseph and James Dominic

The present study examines the rationale behind the increased global presence of corporate green bonds as a green financing tool to facilitate sustainable practices and…

1258

Abstract

Purpose

The present study examines the rationale behind the increased global presence of corporate green bonds as a green financing tool to facilitate sustainable practices and eco-friendly investing. The authors investigate the intriguing question of whether the companies that issue green bonds are valued more by investors or not, and further extend our analysis by exploring whether the green image of companies helps to minimize the value erosion during a crisis and enhance the resilience of the stocks?

Design/methodology/approach

To examine the association between environmental commitments and firm value, the authors use the COVID-19 crisis as an exogenous shock and create a perfect natural setting to eliminate the endogeneity bias from our estimations. Moreover, the authors use propensity score matching to choose a one-to-one match of green bond firms with a larger pool of brown bond firms and eliminate the “size effect” arising out of the disproportionate sample size of green and brown bond firms.

Findings

The results of the study indicate that green bond firms are valued more by investors compared to brown bonds firms. Hence, green bond issuance acts as a strong signal of a firm's environmental commitment and it is well recognized by the investors. One of the possible reasons for a higher value of green bond firms may be due to their ability to arrest value erosion during environmental shocks. The authors could not find any difference in the resilience of green and brown bond firms.

Originality/value

The study contributes to the growing literature in the area of impact investing, specifically on exponentially growing innovative instrument green bond. Our study integrates two areas of research, i.e. corporate finance and impact investing by examining the impact of green bond issuance on firm value and stock market returns. The results would help environmentally sensitive investors to devise their investment portfolios more efficiently.

Details

International Journal of Managerial Finance, vol. 18 no. 4
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 27 May 2020

Manogna R L and Aswini Kumar Mishra

Price discovery and spillover effect are prominent indicators in the commodity futures market to protect the interest of consumers, farmers and to hedge sharp price fluctuations…

832

Abstract

Purpose

Price discovery and spillover effect are prominent indicators in the commodity futures market to protect the interest of consumers, farmers and to hedge sharp price fluctuations. The purpose of this paper is to investigate empirically the price discovery and volatility spillover in Indian agriculture spot and futures commodity markets.

Design/methodology/approach

This study uses Granger causality, vector error correction model (VECM) and exponential generalized autoregressive conditional heteroskedasticity (EGARCH) to examines the price discovery and spillover effects for nine most liquid agricultural commodities in spot and futures markets traded on National Commodity and Derivatives Exchange (NCDEX).

Findings

The VECM results show that price discovery exists in all the nine commodities with futures market leading the spot in case of six commodities, namely soybean seed, coriander, turmeric, castor seed, guar seed and chana. Whereas in case of three commodities (cotton seed, rape mustard seed and jeera), price discovery takes place in the spot market. The Granger causality tests indicate that futures markets have stronger ability to predict spot prices. Supporting these, the results from EGARCH volatility test reveal that there exist mutual spillover effects on futures and spot markets. Thus, it could be inferred that futures market is more efficient in price discovery of agricultural commodities in India.

Research limitations/implications

These results can help the market participants to benefit by hedging out the uncertainty and the policymakers to design futures contracts to improve the efficiency of the agricultural commodity derivatives market.

Practical implications

The findings provide fresh view on lead–lag relationship between future and spot prices using the latest data confirming that futures market indeed is dominant in price discovery.

Originality/value

There are very few studies that have explored the efficiency of the agricultural commodity spot and futures markets in India using both price discovery and volatility spillover in a detailed manner, especially at the individual agriculture commodity level.

Details

Journal of Agribusiness in Developing and Emerging Economies, vol. 10 no. 4
Type: Research Article
ISSN: 2044-0839

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