Firm Investment, Financial Constraint and Voluntary asset sales
This paper contributes empirically to the 'Excess Sensitivity' literature by arguing that results obtained by using investment-cash flow sensitivity as a metric to represent finance constraint of firms can be misleading. This is because cash flow apart from signaling change in net worth may also signal investment opportunities of firms. Following Hovakimian and Titman (2006), we use funds obtained from voluntary asset sales rather than cash flow to represent internal liquidity of firms. Use of funds obtained from voluntary asset sales is justified as it is unlikely to be related to the firm's future investment opportunities unless they are financially constrained. For the exercise we study Indian private manufacturing firms in the period 1994 to 2009. We take care of the endogeneity and the implicit monotonicity problems, which are much debated in the literature, by using an endogenous regime switching model.
Emergence of and Organizational Field: A study of the Palliative Care Field in Kerala, India
Economic Transition and the Value of Business Group Affiliation: Evidence from the Indian Market
There is growing evidence that the institutional voids theory proposed by Khanna and Palepu (1997, 2000a) is too simple to explain the value of business group affiliation (Carney et al., 2011). We contribute to the literature by revisiting the debate through a longitudinal analysis during economic transition. Our approach not only uncovers the dynamics of business group structural factors on affiliates' value but also integrates the merits of several alternative theories which can help to resolve several inconsistencies in the literature. Using 44,000 firm year observations of Indian business groups and standalone firms, for the period 1990-2009, we report the following four main findings: 1) the value spread between business group affiliates and standalone firms persists over time: groups are valued higher than standalone firms. However, the economic value of the value spread narrows over time; 2) the risk premium associated with institutional voids is priced in the capital market; 3) the value advantage of business group affiliated firms is determined mainly by business group scale related structural advantage and not due to business group scope related structural advantage as proposed by Khanna and Palepu (1997, 2000a); and 4) business group scope related dynamics affect affiliated firms' value.