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This paper aims to explore whether following an apparently sub-optimal “almost zero leverage (AZL)” policy by some Indian firms actually creates incremental value for their shareholders or is detrimental for them.

The paper investigates the relative equity market and operating performance of a sample of Indian firms adopting an AZL policy between 1998 and 2014, vis-a-vis, their leveraged peers from the same industry. The authors also look at the dynamic time variability of patterns, if any, in such relative performance and explore whether such patterns are explained primarily by investor perceptions or there are other factors to it.

The study show that Indian firms following post AZL policy exhibit superior equity performance compared to their leveraged counterparts, particularly during market downturns. The authors also find that this superior equity market performance is not merely because of the positive investor perception about the potential benefits of a robust debt-free balance sheet. The authors’ results show that the AZL firms register higher business risk and significantly superior operating performance, post being low leverage. The results hold even after using several robustness checks.

The study concludes that the managers of AZL firms take full advantage of the increased financial flexibility available with them and venture into riskier but more rewarding avenues and actually create incremental value for their shareholders.

The study highlights an apparently counterintuitive pattern in Indian context, counterintuitive particularly because choosing an AZL policy leads to forgo the availability of significant tax shield for firms. The results, the authors believe, can have significant implications for lenders and investors in the Indian capital markets in particular and emerging markets in general.

This study seeks to examine the relationship between a firm’s effectiveness in managing working capital (WCM), as measured by the cash conversion cycle (CCC), and its exposure to product market competition (PMC).

Using 85,356 firm-year observations of 9,611 unique firms for the period 1990–2019, from the US, the baseline model assesses the CCC and PMC connection while controlling for multiple firm-level factors. Additional analyses are conducted to control for financial constraints, economic policy uncertainty, and endogeneity.

An inverse relationship is shown between PMC and CCC, indicating that firms facing increased competition tend to implement more efficient WCM strategies in order to free up scarce resources. In addition, we observe that increased PMC pushes companies to strategically adjust their credit policies, while also improving their administration of payables and inventories, resulting in improved efficiency. Our research highlights that CCC serves as a mediator between PMC and firm performance.

This study enhances comprehension of the impact of PMC on WCM, offering practical recommendations for companies seeking to optimize their strategy in competitive settings.

The study provides valuable insights for managers operating in competitive markets, highlighting the significant influence of working capital on business policies as a response to competition. This study contributes to the existing literature on WCM and PMC by providing guidance to organizations on how to improve their WCM practices, maintain competitiveness, and free up scarce resources.

The purpose of this paper is to investigate the existence of an optimal or target level of working capital for the Indian manufacturing firms, and whether firms intensely follow the target or not.

The paper uses cash conversion cycle as a measure of net working capital and employs partial-adjustment dynamic panel models to test its target-following behavior.

The empirical results show that there is no evidence of systematic target-following behavior of working capital for the Indian manufacturing firms. The results hold true even after dividing the sample into four groups depending on the sign and magnitude of deviation. The results further show that lack of target-following tendency is not quite influenced by varying firm-specific characteristics and, therefore, seems to be a systematic feature across firms in India.

Scarcity of such working capital management studies across emerging economies, facing several financial constraints, limits the comparison of findings. Future studies should be conducted to confirm the results.

The findings imply that even though an optimal working capital might exist, emerging market firms may not be able to actively pursue it on account of several financial constraints and managerial considerations.

The study contributes to the scant existing literature on the target-following behavior of working capital management in the Indian manufacturing firms, representing a typical emerging market facing several financial constraints.

This paper aims to examine various factors affecting the pricing of audit services and the selection of auditors in the Indian audit market. This paper also aims to investigate the impact of financial distress conditions on the audit pricing and auditor choice decisions of a firm, particularly in the context of a developing economy.

The sample comprises 22,644 firm-years for 1,366 Indian firms from 1990 to 2015. The authors adopt ordinary least squares regression technique to model audit fee, and logistic regression technique to model auditor choice as a function of various factors relating to firm attributes and auditor characteristics.

This paper finds that auditors tend to charge an audit fee premium when they are affiliated to a Big 4 auditor, have industry specialization or jointly provide auditing and non-auditing services. Additionally, firms with larger boards, higher proportion of independent board of directors and CEO–Chairman separation are more likely to choose a Big 4-affiliated auditor. The results also suggest that financially distressed firms tend to pay significantly lower audit fees and are more likely to choose non-Big 4 auditors.

This paper is among the few studies which investigate how financial distress impacts the audit pricing and auditor choice decisions of a firm in the context of emerging economies. The findings of this paper raises serious concerns about the credibility of the audited financial statements and corporate governance mechanisms of firms undergoing financial distress. The empirical results of this paper have strong implications for practitioners, regulators and investors.

Recent papers on target capital structure show that debt ratio seems to vary widely in space and time, implying that the functional specifications of target debt ratios are of little empirical use. Further, target behavior cannot be adjudged correctly using debt ratios, as they could revert due to mechanical reasons. The purpose of this paper is to develop an alternative testing strategy to test the target capital structure.

The authors make use of a major “shock” to the debt ratios as an event and think of a subsequent reversion as a movement toward a mean or target debt ratio. By doing this, the authors no longer need to identify target debt ratios as a function of firm-specific variables or any other rigid functional form.

Similar to the broad empirical evidence in developed economies, there is no perceptible and systematic mean reversion by Indian firms. However, unlike developed countries, proportionate usage of debt to finance firms’ marginal financing deficits is extensive; equity is used rather sparingly.

The trade-off theory could be convincingly refuted at least for the emerging market of India. The paper here stimulated further research on finding reasons for specific financing behavior of emerging market firms.

The results show that the firms’ financing choices are not only depending on their own firm’s specific variables but also on the financial markets in which they operate.

This study attempts to assess mean reversion in debt ratios in a unique but reassuring manner. The results are confirmed by extensive calibration of the testing strategy using simulated data sets.

This paper investigates whether a simple accounting information-based fundamental analysis strategy could identify winners from losers within a portfolio of high book-to-market (value) stocks, over the last decade in the Indian equity market, where historically, information disclosure and transparency levels have been on the lower side.

Using a sample of ‘value’ firms, the authors formulate an ‘F-score’ for each firm as the sum of binary signals (favourable and unfavourable), with respect to nine key variables. The authors then form ten equal size F-score portfolios within the value band for each year, and track the performance of robust high F-score firms vis-à-vis that of weaker low F-score firms.

The study highlights that the historical success of a value strategy, in general, relies on the strong performance of a few firms while ‘tolerating the poor performance of many deteriorating companies’ within the broad value group and shows that firms with strong fundamentals within the value group outperform their less robust counterparts, based on absolute as well as risk adjusted measures.

The results of the study show that strong performers can indeed be distinguished from underperformers within the broad category of value stocks. This can have significant implications for investors at large in the Indian equity market.

The study suggests an approach to identify potential winners within a broad ‘value’ portfolio using an array of accounting information, even in a relatively less transparent Indian equity market.

The purpose of this paper is to examine the causal relationship between economic development and financial sector development for 28 countries at different stages of their development. The authors specifically focus on the nature of causality during economic boom and tranquil cycles.

The study uses quarterly time series panels of 17 developed and 11 emerging countries, during 1993Q1-2014Q4 with each having three sub-panels – full sample, a period of the economic uptrend (UP), and period of the economic downtrend. The authors use a univariate analysis for initial screening followed by panel unit root test, panel co-integration and causality test proposed by Toda–Yamamoto to examine the causal relationship.

The principal results suggest that for developed economies, there is a causal flow from financial sector to real sector in line with the “supply-leading” hypothesis, whereas for emerging economies, it is from real sector to financial sector, in line with the “demand-following” hypothesis. This overall relationship is strong for both emerging and developed economies during economic boom or UP cycles, but becomes weak during economic downturns or tranquil periods.

This study is different from previous studies on this issue and contributes to the existing literature in a number of ways. First, the focus of this paper revolves around identification of differential patterns in causal flows between real and financial sectors for different economies, across different economic cycles. Second, to present a robust representation of financial sector, the authors consider both banking sector and stock market parameters as the proxy for financial sector development. Third, the authors address the “stock-flow problem” in the measurement of financial variables a typical criticism of some of the previous studies. Finally, the authors use a rich sample size comprising of about 2,500 quarterly observations for each variable, with about 1,500 observations from developed and 1,000 from emerging economies.

Coronavirus disease (COVID-19) was declared as a pandemic since COVID-19's widespread outbreak and the hospitality industry has been the hardest hit due to lockdown. Consequently, hospitality workers are suffering from the negative aspects of mental health. In the event of such a crisis, this study aims to explore the link between unemployment and home isolation to the willingness to choose electronic consultation (e-consultation) by exploiting psychological ill-being and behavioural intention (BI) with marital status as a moderator.

A quantitative methodology is applied to primary data collected from 310 workers from the hospitality industry through an online survey.

Findings of this study suggest that the usage of the e-consultation service can be adopted using three levels. There are valid reasons to conclude unemployment and home isolation are linked to higher rates of psychological health behaviours, which can result in stigma, loss of self-worth and increased mortality. The adverse effect is higher for single individuals than for married people.

The study focussed on e-consultation, BI coupled with the Fishbein scale and a classification model for the prediction of willingness to choose e-consultation with the extension of Theory of Planned Behaviour (TPB).

In order to enhance the performance of R&D in manufacturing organizations, the R&D managers need to identify the internal as well as the external factors that affect the R&D performance of manufacturing organizations in India. They need to understand the inter‐dependencies of these factors. This paper seeks to identify the critical success factors for R&D in Indian manufacturing firms.

There may be a number of factors that are critical for achieving acceptable R&D performance and these factors have been identified by a number of instruments or means, such as questionnaire surveys, brainstorming, and consolidation by Principal Component Analysis (PCA). A total of 14 factors have been identified by using principal component analysis and finally we have developed a structure of interrelationship among the identified critical success factors using an interpretive structural model.

The results show that R&D vision and direction and R&D oriented culture are the most important critical success factors (CSFs) and they have a great influence on the other CSFs. Though R&D vision and direction and R&D oriented culture are the short‐term objectives, Indian manufacturing firms should be equipped with proper R&D management strategy to achieve the long‐term objectives, such as achievement of revenue and profitability within a quick time frame.

Although R&D managers of Indian manufacturing firms are aware of various critical success factors, a systematic approach is required for identifying them, and as these factors may have complex interrelations between them for analyzing R&D performance in a manufacturing firm, it is essential that such an approach is in place. The hierarchy based ISM further defines those factors which are really critical and need more focus on the root causes of the success. In addition to that, the proposed ISM model acts as a good guideline in order to improve the performance of the manufacturing R&D organizations in India.

The paper provides an interpretive structural model to develop a map of the complex relationships and magnitude among identified critical success factors.

Member-owned business organizations, such as cooperatives, are engaged in various economic activities that touch our everyday lives. Sitajakhala Dugdha Utpadak Samabai Samiti Limited (Sitajakhala Dairy Producers Cooperative Society Limited) is a successful cooperative society in the northeastern region of India. The purpose of this case study is to illustrate how the cooperative manages its production and supply chain of milk and milk products and highlights several issues that the cooperative encountered in the recent past and how those issues were managed. This case also illustrates how an agribusiness cooperative has been growing over the years, including expansion of business and the creation of a brand image, as well as benefiting its members and their communities.

The authors used a case study approach where they went for in-person interviews of Sitajakhala's executive members and office staff; in addition, the authors were given access to Sitajakhala's marketing and financial records as well as its annual reports and vision documents.

Sitajakhala Co-op provides a platform where individual dairy farmers (most of who are small farmers and many of them are illiterate) can unite to bargain for higher prices for their milk. Due to its member-oriented business strategy, Sitajakhala Co-op has been growing well with active support of its members. Consistent quality control and marked improvements in labeling, bottling and packaging of milk and milk products has helped the cooperative to establish itself as a leader in dairy products supplier in Assam among bulk buyers as well as individual consumers. Sitajakhala cooperative also provides dairy farming related services to its members for free of charge to improve milk production and quality. One of the shortcomings of the cooperative is underutilization of its modern milk processing plant which needs to be addressed by the management in earnest.

This case study is based on information from one dairy cooperative in Assam, India; thus, the findings of this case may not translate into other dairy cooperatives in India or elsewhere. Nonetheless, cooperative practitioners may find the findings useful from a management perspective.

Sitajakhala Co-op management was keenly aware of the non-dairy related needs of the community it serves. Some of such services include free medical ambulance service for its members, supporting secondary education through providing merit and need-based scholarships and funding physical improvements to a local high school and a local college. In addition, the cooperative regularly provides funding to local sports and cultural events and local social institutions which have positive impact on the larger community. Sitajakhala cooperative has been providing employment to the local youth in the Morigaon area and plans on continuing to do so.

To the best of our knowledge, this is the first case study focusing on the management and operations of a dairy cooperative in the northeastern part of India. Knowledge gained from such study is expected to benefit not only Sitajakhala cooperative but also other dairy cooperatives in a similar situation. This case study will also benefit senior undergraduate and/or graduate students specializing in agricultural economics/agribusiness and can also be used for executive training for the management of academic institutions and food companies.