Poonam Gupta, Kalpana Kochhar and Sanjaya Panth
This paper aims to analyze, using the bank-level data for India from 1991-2007, the effect of financial sector liberalization on the availability of credit to the private sector…
Abstract
Purpose
This paper aims to analyze, using the bank-level data for India from 1991-2007, the effect of financial sector liberalization on the availability of credit to the private sector. The authors specifically ask whether public and private banks deployed resources freed up by reduced state preemption to increase credit to the private sector.
Design/methodology/approach
The authors use bank-level data for India from 1991-2007 and difference in difference estimates to analyze how state ownership of banks affected the allocation of credit to the private sector post liberalization, and additionally how the size of fiscal deficit affected this allocation.
Findings
The authors find that post liberalization, public banks continued to allocate a larger share of their assets to government securities, or held more cash, than private banks. Crucially, public banks allocated more resources to hold government securities when fiscal deficit was high. The authors rule out profit maximization, need to hold safer assets or the lack of demand for private credit as the possible reasons for the preference of the public banks to hold government securities. The authors suggest that moral suasion or “laziness” is consistent with this behavior.
Originality/value
Our findings suggest that in developing countries, with fewer alternative channels of financing, government ownership of banks, combined with high fiscal deficit, may limit the gains from financial liberalization.
Details
Keywords
After a successful discussion and analysis of the case, the participants will be able to distinguish and appreciate the situations of conflict of interest (COI), whistle-blowing…
Abstract
Learning outcomes
After a successful discussion and analysis of the case, the participants will be able to distinguish and appreciate the situations of conflict of interest (COI), whistle-blowing, etc. Initiate appropriate methods to avoid/minimize the impact of COI and ensure justice and fair-play to all stake-holders. Identify and appreciate the work-context of each executive-position and initiate standard operating procedures to protect the interests of the enterprise and all its stakeholders. Appreciate the relevance of whistle-blowing and to initiate appropriate methods to ensure justice and fair-play to all stake-holders.
Case overview/synopsis
In the context of the Industrial Credit and Investment Corporation of India (ICICI)-bank, the systemic inadequacies seemed to have failed in preventing the incidences of COI. The organization was too centralized to be able to respond proactively to the allegations. The case lays bare the inadequacy of professionalism among the media in responding promptly to such instances. The case generalizes that, with increasing globalization, such incidences have global ramifications and the organizations face much greater risks than ever. The case concludes that to emerge as a mature and leading organization in the global market, ICICI-bank needed to strengthen various aspects of corporate governance; similarly to emerge as a developed economy, India needed to develop independent watchdogs to monitor the activities of corporations continuously. Media needed to be independent and mature to fulfil its duty of continuous and transparent communication to the public.
Complexity academic level
The case can be understood and analysed by management students in the post-graduate level or by working executives with at least four to five years of experience in the corporate sector.
Supplementary materials
Teaching notes are available for educators only.
Subject code
CSS 11: Strategy.
Details
Keywords
Kalpana Tokas and Arnab Kumar Deb
The paper is in the area of international business and international trade. Specifically, this paper aims to focus on cross-border trade flows of goods and services between India…
Abstract
Purpose
The paper is in the area of international business and international trade. Specifically, this paper aims to focus on cross-border trade flows of goods and services between India and its partner nations.
Design/methodology/approach
Using the Cultural, Administrative, Geographic and Economic (CAGE) distance framework (Ghemawat, 2001), this paper provides empirical support for the impact these distance factors exert on the volume of trade in goods and services between countries. The sample used for empirical analysis consists of a set of 62 OECD countries which are involved in trade in goods and services with India over the period 2005 through 2015. This paper estimates a fixed-effects model to provide a comprehensive examination of all the distance factors impacting the bilateral cross-border trade flows of India.
Findings
The empirical findings in this paper show that different dimensions of the CAGE distances have varied influence on volume of trade flows between India and its trading partners. Also, the extent of this influence is guided by the nature of industries – manufacturing or services.
Originality/value
Departing from the common practice in the literature, using the trade flow data for both Indian manufacturing and service sectors separately, this paper examines to what extent is the impact of these distance factors industry driven.