Search

The rise in insolvency filings in India has drawn significant academic attention due to the high costs associated with financial distress. This study investigates the extent of earnings management by distressed firms in India, exploring factors like capital infusion, institutional ownership, regulation, and accounting flexibility. Earnings management is captured through three different proxies: accrual, real, and total earnings management. Financial distress is measured through three comprehensive definitions. Data spanning from 2008 to 2022 is collected, and panel fixed-effects regression is used for data analysis. The findings suggest that distressed firms tend to engage in earnings management through real earnings management, primarily via sales manipulations and overproduction. Earnings management is prevalent prior to new debt issuance but not before new equity issuance, and the presence of institutional investors effectively limits earnings management. Furthermore, companies resort to real earnings management when accrual earnings management is constrained by regulation and accounting flexibility. [ABSTRACT FROM AUTHOR]

Acquisitions constitute substantial corporate investments, often leading to changes in ownership and top management giving rise to possible conflicts of interest. The impacts of such conflicts following an acquisition are absorbed by the acquirer and are referred to as agency costs. This study focuses on exploring the influence of the target companies on changes in the post-acquisition agency costs of acquiring companies. A panel fixed effects model is used to analyze acquisitions that took place between 2008–09 and 2019–20. The study's findings indicate that post-acquisition changes in the agency costs of acquirers significantly vary based on the presence of domestic and foreign promoters in the target company. Further promoter groups such as domestic promoters and foreign promoters contribute to conflicting interests, exacerbating post-acquisition agency costs. The monitoring role assumed by foreign promoters of target companies plays a pivotal part in reducing the post-acquisition agency costs of acquirers. Foreign promoters also positively influence post-acquisition profitability by adversely affecting operating expenses, suggesting that they mitigate agency costs by exerting control over management through the monitoring of debt, cash, and profitability. The post-acquisition utilization of the target's cash reserves positively correlates with the operating expenses of the acquirer. It is observed that the acquisition of larger targets magnifies agency costs. [ABSTRACT FROM AUTHOR]

This study examines the implications on the valuations of privately held firms when stakes are acquired by venture capitalists in India. In addition, the effect of fund size and revenue multiple is considered as a determinant of firm value. The study is based on a sample of 1229 rounds of funding during the period 2007-2015. The data was obtained from Venture Intelligence. Three major observations emerged based on an OLS regression. Firstly, it is observed that the stake acquired by venture capitalists has a negative effect on firm value. It supports the belief that when a firm reaches its maximum valuation from the promoter's perspective, there is a tendency to liquidate additional stakes. Secondly, a positive association between the revenue multiple and valuation is recognized. Thirdly, the convex relationship (U-shaped) between the fund size and firm valuations as seen in the case of developed economies, appears to be non-existent in India. [ABSTRACT FROM AUTHOR]

Institution-based Technology Business Incubators are on the rise in India, as a means of promoting innovation-based tech start-up ecosystems, due to increased policy initiatives. Against this background, we have traced the origin and process of building a start-up ecosystem in IIT Madras, Chennai of India, based on semistructured interviews held with the stakeholders of the ecosystem. Subsequently, we have ascertained the key components of IIT Madras start-up ecosystem, and the process of incubation comprising pre-incubation, incubation and post-incubation phases. Finally, we have derived the key lessons from the ecosystem development experience and incubation process which enable generation of start-ups from both students and faculty, apart from alumni and ex-industry executives. Though this ecosystem model has emerged over a period of time through learning and experience, the ecosystem is able to generate more than 100 start-ups, majority of them being from students and faculty. Thus, the evolved start-up ecosystem of IIT Madras is able to generate facultysupported and student-led entrepreneurship successfully. [ABSTRACT FROM AUTHOR]

This paper examines the factors influencing abnormal returns around bonus and rights issue announcements. The results of the study indicate that market condition and type of industry have significant influence on abnormal returns and the bonus ratio does not have any significant effect on abnormal returns. For rights announcement, issue size and market conditions have a significant impact on returns. Firm size, operating leverage, debt-equity ratio and volatility of stock returns are the other firm-related factors that have a significant impact on stock returns around bonus announcement. But for rights issue, only firm size is the significant firm-related factor which has a positive impact on the returns. [ABSTRACT FROM AUTHOR]

This paper examines the stock price liquidity chances before and after the bonus and rights issue announcement. Liquidity measured using raw trading volume ratio, relative trading volume ratio and liquidity ratio suggest that raw trading volume and relative trading volume have decreased around bonus and rights announcements, though insignificantly. Market depth, as measured by the liquidity ratio, has significantly decreased after the bonus and rights issue announcement in the Indian stock market. There is evidence of negative and significant decrease in stock price liquidity for bonus and rights issue announcements similar to other issue announcements in US, UK and other emerging economies. The results support cash substitution hypothesis and signaling theory but rejects liquidity hypothesis with respect to bonus and rights issue announcements. [ABSTRACT FROM AUTHOR]