A recession is generally a difficult time for companies that are trying to raise venture capital, as venture capital may not be adequate to meet the demands of companies when the economy is suffering. For this reason, a recession is not an ideal time to start a company that requires considerable amount of start-up capital to get off the ground. The paper, "The Relationship Between Capital Markets and the Frequency and Duration of Recession", by Piyapas Tharavanij, investigates the effect of capital market development on the frequency of recession and the fraction of time the economy spends in recession, using quarterly data of 35 countries from 1975 to 2004. The main finding of this paper is that countries with a higher capital market development and faster growth tend to spend a lower fraction of time in recessions. The author uses `turnover ratio' as an absolute measure of capital market development and uses `value traded ratio' and `market capitalization ratio' as alternative measures for robustness checks. He also uses classical business cycle dating method in the analysis, as it has the advantage of being objective and easy to interpret.

Many analysts and traders study patterns in bid-ask spreads to understand which prices trigger demand for both sellers and buyers. Other analysts feel that the bid-ask spread itself has little predictive value. There may be several bid prices and several ask prices for security at any point in time; but, only the best bid and the best ask are used to calculate the bid-ask spread. In this regard, the paper, "Using Intra-Day Data to Analyze Bid-Ask Spread: A Case of Mauritius Stock Exchange", by Rojid Sawkut, Seetanah Boopen and Hossenbocus Ruwaydah, examines the determinants of daily bid-ask spread in the Mauritius Stock Exchange. Out of 42 listed companies, the authors selected only 12 stocks on the official market of the Stock Exchange of Mauritius. The stocks have been selected according to their size, liquidity and market capitalization. Data on the daily bid prices and ask prices for the 12 selected securities were collected. The authors find daily spread of each of the 12 stocks to see whether it is determined by the same variables and then analyze the effects of the variables by using panel data.

Enforced savings schemes do little or nothing to increase overall national savings; they cannot make any significant contribution to economic growth even if there was a positive and causal link between total national savings and growth. Besides, such schemes clearly distort savings and investment patterns in a number of ways, and are therefore likely to have negative effects on growth and welfare. The paper, "Time Series Analysis on Factors Influencing Saving Rate in Malaysia", by Chen-Chen Yong, Kim-Lan Siah, Pei-Lee Teh and Keng-Boon Ool, examines the factors influencing Malaysia's savings rate and re-examines the short and long-run relationship of the Malaysian savings function using the Bound testing approach proposed by Pesaran. The paper concludes by saying that the effect of higher real interest rates on the savings rate was found to be insignificant and the empirical results show that the main factors behind the high rate of savings in Malaysia is the rapidly declining age dependency ratio.

The organizational design of the working capital management depends significantly on company specific circumstances. The purpose of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both the maturing short-term debt and the upcoming operational expenses. The paper, "Impact of Working Capital Management in the Profitability of Hindalco Industries Limited", by J P Singh and Shishir Pandey, explores the working capital components and impact of working capital management on profitability of Hindalco Company. The paper covers a period of 18 years and focuses primarily on trends and working capital impact on profitability. Correlation analysis has been used in this paper for the point of establishing specific relationships between working capital and profitability ratios.

Inter-firm relations differ considerably between capitalist economies as a result of institutional differences, especially in terms of trust and mechanisms ensuring adherence to contractual commitments. The paper, "Determinants of Inter-Firm Contractual Relations: A Case of Indian Software Industry", by Francis Xavier Rathinam, makes a contribution to this literature by exploring the interaction of formal and informal mechanisms as determinants of relational information flows. The author collected data on contractual terms and conditions, project and agent characteristics from senior project managers from the firms in Techno-park, Thiruvananthapuram. Using this variation in the structure of outsourcing contracts, this paper empirically tests the relationship between contract design and its determinants.

The FCCB is India Inc.'s latest fashion. It is a foreign currency (generally dollar) denominated bond that, in addition to offering a return or yield, also offers investors the option of converting their principal investment into equity at a pre-decided price. In this context, the paper, "Foreign Currency Convertible Bonds (FCCBs): Taking India Inc. to the Global Financial Avenues", by Deepak Devgan and Harpreet Dusanjh, speaks about the fundamental concepts relating to FCCBs and also looks at the pros and cons of these innovative instruments as a contemporary source of finance. The paper also examines the rationale of issuing FCCBs by India Inc. as well as the valuation criteria of FCCBs.

-- Srinivasulu Bayineni
Consulting Editor