The Relationship Between Capital Markets and
the Frequency and Duration of Recession
-- Piyapas Tharavanij
This paper investigates the relationship between capital markets and the frequency and duration of recession. The
main finding is that the frequency of recession is not robustly linked to measures of the capital market development. On the
other hand, the time the economy spends in recession is significantly related to the capital market development, though
the marginal effect is small. The implication is that countries with more advanced capital markets tend to spend a
lower proportion of time in recession. Results are generated using quarterly data of 35 countries from 1975 to 2004.
© 2008 IUP . All Rights Reserved.
Using Intra-Day Data to Analyze Bid-Ask Spread:
A Case of Mauritius Stock Exchange
-- Rojid Sawkut, Seetanah Boopen and Hossenbocus Ruwaydah
The focus of this study is to assess the determinants of daily bid-ask spread. Following Ng (2007), the study uses
an effective spread rather than a quoted one. Ng, argues that an effective spread is based on the deviation between
trade price (true price) of the transaction. First, a daily spread of the individual stocks is modeled to see whether it
is determined by the same variables and then, the effects of the variables are analyzed using panel data. The study
also analyzes the day of the week effect in the daily average spread, to see if the spread is dependent on any day of the
week. Similar to Demsetz (1968), the panel data results obtained show that the bid-ask spread is dependent on the closing
price of stock, level of market activity, the firm size and the liquidity of the stock. Also, the firm size exhibits an
inverse relationship with the daily spread. Contrary to McInish and Wood (1992), this study concludes a positive
relationship between the level of market activity and the daily bid-ask spread.
© 2008 IUP . All Rights Reserved.
Time Series Analysis on Factors Influencing
Saving Rate in Malaysia
-- Chen-Chen Yong, Kim-Lan Siah,
Pei-Lee Teh and Keng-Boon Ool
The validity of the assertion that high saving rates are associated with persistent high economic growth rates
has become questionable after the onset of 1997/1998 Asian financial and economic crises. This paper aims to
examine the factors influencing the saving rate of Malaysia as well as to reestimate the savings function in order to
answer the question whether high saving rates are associated with Malaysia's high rate of economic growth using a
recently developed Bound testing approach proposed by Pesaran
et al.(2001). The sample period runs from 1974-2004.
The Autoregressive Distributed Lag (ARDL) model indicates that in the long-run, per capita GDP and per capita
GDP growth rate have a positive impact on saving rates, while foreign saving and dependency ratio have a
negative influence on saving. However, the interest rate is found to be insignificant on Malaysia's saving rate.
© 2008 IUP . All Rights Reserved.
Impact of Working Capital Management
in the Profitability of Hindalco Industries Limited
-- J P Singh and Shishir Pandey
For the successful working of any business organization, fixed and current assets play a vital role. Management
of working capital is essential as it has a direct impact on profitability and liquidity. An attempt has been made in
this paper to study the working capital components and the impact of working capital management on profitability
of Hindalco Industries Limited. The paper also makes an attempt to study the correlation between liquidity,
profitability and Profit Before Tax (PBT) of Hindalco. The study is based on secondary data collected from annual reports
of Hindalco for the study period 1990 to 2007. The ratio analysis, percentage method and coefficient of correlation
have been used to analyze the data. Multiple regressions were used to check the significant impact on the profitability
of Hindalco.
© 2008 IUP . All Rights Reserved.
Determinants of Inter-Firm Contractual Relations:
A Case of Indian Software Industry
-- Francis Xavier Rathinam
The impediments to inter-firm contractual relations, the existing formal and informal ways of getting around
them and the role of reputation and trust in mitigating conflict of interest between firms in the context of Indian IT
industry is analyzed in this paper. Contract design is specified as a function of reputation (age, repeated contracts and
quality certification), asset specificity, complexity and uncertainty. We test the likelihood of observing Time and
Material contract, a better propertied contract in the face of uncertainty. Empirical evidence confirms the propositions
posited. Reputed firms tend to get highly complicated and uncertain projects. Asset specific investments do not seem to
have any implication on contract type and complexity. The results broadly hint that the firms reckon more on
creating understanding through formal quality certifications to solve pre-contractual adverse selection problems and
repeated contracting to solve the problems of behavioral uncertainties rather than relying on a court of law.
© 2008 IUP . All Rights Reserved.
Foreign Currency Convertible
Bonds (FCCBs): Taking India Inc.
to the Global Financial Avenues
-- Deepak Devgan and Harpreet Dusanjh
The financial markets of the world have undergone a sea change during the last few decades and the same
winds of change have also entered the Indian capital markets. With the advent of liberalization, a variety of new
financial instruments are replacing traditional avenues of finance and India Inc. has flown to overseas markets to get
finance for expansion and other purposes. Amidst these, a new and popular array of innovative instruments is a type of
bonds called Foreign Currency Convertible Bonds (FCCBs) that have provided access to cheaper overseas debt for
Indian companies. The paper tries to explore the various dynamics of these innovative bonds that have lured India
Inc. Besides, these instruments are also helpful from macro (economy) point of view and strengthens the motive behind
the study of these instruments.
©
2008 IUP . all Rights reserved.
