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Accounting and Accountability:
A Stakeholder-Agent Perspective
-- Amit K Mallik and Susanta Mitra
This paper is an effort at understanding the two contrary frameworks of accounting investigations in the sense
of theoretical and philosophical underpinnings—the traditional agency view of accounting where the
objective function is to maximize shareholders' wealth, subject to the constraint of managerial egoism and a petty
recognition to other corporate actors; and the newly emerged stakeholder view resulting out of an interdisciplinary
research tradition, with the aim of satisfying a broad range of stakeholders, including the shareholders and their
agent-managers, in terms of a contribution-inducement exchange relationship. Though on the ground of
theoretical reasoning, the two frameworks are mutually exclusive to each other, nevertheless, there is a growing perception
in contemporary accounting research that demonstrates the likelihood of an alternative framework of analysis
by exploring the possibilities in the sense of a convergence of the two converse views. A methodical scrutiny of
the two contrary positions has been made in the light of their commonalities and divergences and an attempt has
been made to corroborate with the growing perception of converging the two by subsuming the agency approach
into a broader stakeholder model.
© 2009 IUP. All Rights Reserved.
Insights on Shareholder Value Addition from India's Wealth Club: A Study of
Selected Companies
-- Mandeep Kaur and Sweety Narang
`Managing for shareholder value' and `shareholder value creation' have become the widely accepted
corporate objectives since the last decade. Most of the companies in India are still in the dark about what exactly they
are supposed to do for managing shareholder value, though virtually they all say that they are doing it. For the
real key to create wealth, a business enterprise has to earn economic returns to its owners for its economic
survival. In a market-driven economy, there are a number of firms that create wealth, whereas others certainly destroy
it. Economic Value Added (EVA), being a value-based measure, assists investors with wealth discovery and
company-selection processes. In the present study, an attempt has been made to explain the application of EVA
principles for the evaluation of companies and industries. It highlights and explains all the elements that find place in
EVA computations like calculations of Return on Invested Capital (ROIC), Weighted Average Cost of Capital
(WACC), cost of debt, cost of equity as per Capital Asset Pricing Model (CAPM), cost of preference capital, and finally
of EVA. Taking a sample from India's most valuable companies, the study shows that on an average, about 48%
of the companies are actually wealth destroyers. It is quite shocking that of the 12 years study period, from
1996-2007, the sample registered negative EVA for eight years consecutively (1996-2002). Hence, the study raises
a question as to whether this is a sufficient achievement for India's so-called most valuable companies or not.
Finally, the study provides the implications of the findings on corporate business strategies of Indian companies
and advocates a few suggestions.
© 2009 IUP. All Rights Reserved.
Shareholder Value Creation in the Indian
Banking Industry: An EVA Analysis
-- G Soral and Shurveer S Bhanawat
Economic Value Added (EVA) has received a lot of recognition as a measure of shareholder value creation.
While the measure has been widely used for the purpose all over the world, many research studies have appeared
to examine variety of issues related to EVA. An attempt has been made in this paper to revisit EVA-based analysis
for the Indian Banking Industry. A Sample of 14 public sector and 12 private sector banks listed in Bombay
Stock Exchange has been selected. The financial data of these sample units for four years, viz., 2003-04 to 2006-07,
have been used for the analysis and comparison. Equity approach has been followed to compute EVA. Average EVA
for all public sector banks under study for the whole period of analysis was found to be Rs. 774.57 cr.
The corresponding figure for the private sector banks was Rs. 393.47 cr. This finding contradicts with that of
some earlier researches (Parsuraman, 2000; and Thamy et al., 2000), which concluded that Indian banks do not
create any value for their shareholders. The difference between the mean values of EVA for public sector and private
sector banks, however, was not found significant (value of `t' 0.0096 < 2.06). Among public sector banks, State Bank
of India (SBI) ranked the highest in terms of average EVA (Rs. 6193.24 cr), while Canara Bank was the only one
with negative average EVA (Rs. 1390.20 cr). ICICI Bank Ltd. stood highest among private sector banks with regard
to average EVA (Rs. 2036.12 cr), while no bank in this category had negative average EVA for the entire period of
the study. Correlation analysis of EVA with other related figure was another objective of the present research and
Karl Pearson's coefficients of correlation were determined and analyzed in the paper.
© 2009 IUP. All Rights Reserved.
Perceived Usefulness of Corporate Disclosure Through the Web: An Empirical Study
-- Subhash Chander and Manjinder Singh
The World Wide Web (www) has been adopted as a new medium for disseminating corporate information. It is
a medium that offers numerous benefits for distributing business information to stakeholders over traditional
means like the printed annual reports. The present paper analyzes the perceived usefulness of corporate disclosure
through the Web by surveying retail investors taken from the selected cities of Punjab and Chandigarh (union territory).
The data is collected from the selected respondents by personally administering the pretested questionnaire.
Factor analysis has been applied to identify the structure of the Web-based factors, which have the potential to
enhance the usefulness of corporate information. Improvement in quality of information, better decision making,
increased usefulness of information, better evaluation, and enhanced competition have been identified as the
factors explaining the perceived usefulness of corporate disclosure through the Web.
© 2009 IUP. All Rights Reserved.
The Effects of Auditor Gender
on Audit Quality
-- Diane Breesch and Joel Branson
From the existing literature, it appears that gender has a significant influence on the manner in which information
is collected and processed. Gender also appears to have a significant effect on the risk profile. This
paper examines the effects of auditor gender on audit report and audit opinion. Only a limited number of studies have investigated
gender differences in an audit context. The paper
tests its hypotheses on the basis of a laboratory experiment in which
it analyzes the final written exams of 20 female and 20
male future auditors. The findings suggest that
women auditors discover more potential misstatements than male auditors,
though they analyze the misstatements in a less
accurate manner than male auditors. The findings also indicate that
women auditors are more risk-averse than male
auditors. Implications on auditor choice by companies, assignment of personnel to audit
teams, and quality control issues are also
discussed in the paper.
© 2009 IUP. All Rights Reserved.
Selection of Industrial Investment
of a Province in Iran
-- Younos Vakil Alroaia and Hamid Gharzi
This paper focuses on the ranking of industrial investment in the Khorasan-e-Razavi province of Iran. The
designing of industry must involve selection of those that have sufficient success potential. Hence, from several factors
of success, the following four indices have been selected—export rate, productivity, employment, and capital.
These indices have been studied over a period of five years and important criteria for evaluating the alternatives
(selection of industry) by each of the above four indices have been identified. Also, the Technique for Order Preference
by Similarity to Ideal Solution (TOPSIS) has been employed to calculate the success potential of each alternative,
as evaluated by the indices. The empirical data comprises the longitudinal survey of the industries of the
Khorasan-e-Razavi province. The study finds that beverage and food industries are placed as the first priority. The study
also finds nine industries, which are expected to employ labor and increase their investment as well as efficiency.
© 2009 IUP. All Rights Reserved.
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