Firm Performance and Size in Liberalized Era: The Indian Case

Kakani, Ram Kumar; Kaul, Mayank

doi:10.2139/ssrn.905001

Cited by 4 publications

(3 citation statements)

References 10 publications

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“…Risk is expected to drive the cost of financing as well as need external financing upwards, and both these reasons drive the profitability down. A negative relationship was supported by empirical studies (Kakani and Kaul, 2002;Narang and Kaur, 2014). However, in a scenario when managers can control the debt-related perils, a positive relationship is observed (Zainudin et al, 2018).…”

Section: Growthmentioning

confidence: 90%

Profitability determinants of infrastructure public private partnerships (PPPs): empirical evidence from Indian data

Kumar

Srivastava

Tabash

et al. 2021

JFMPC

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Purpose The purpose of this study is to empirically investigate the variables having an impact on profitability of public private partnerships (PPPs) in India using a balanced panel data of 171 unlisted PPPs from different infrastructure sectors such as road, power generation, real estate and ports. Design/methodology/approach Estimations were done using Arellano–Bond dynamic panel data estimation and seemingly unrelated regression models on a balanced panel data of 855 firm-years for 171 unlisted PPPs in India. To further test the estimation robustness, panel-corrected standard errors model was used. Findings The study findings indicate that in firm-specific factors, leverage, size, non-debt tax shield, growth and risk have significant positive impact on PPPs’ profitability, whereas in macroeconomic factors, only inflation has significant positive relationship. Although the relationship of all determinants is in sync with various theories and approaches, but these are not significant. Using the robustness test, the results are found to be robust and consistent with resource-based view and strategy-structure-performance approaches. Practical implications As PPPs are gaining prominence in the development of infrastructural resources, their profitability is of significant importance to drive private investments in infrastructure development, the identification of factors which determine profitability is critical for researchers, practitioners, policymakers and fund providers such as equity investors and debt providers. Originality/value The empirical literature on profitability determinants is focused on various sectors including small and mid-size enterprises (SMEs) and micro firms, but to the best of the authors’ knowledge, this is the first study, in both developed and developing economies, to empirically investigate the determinants of profitability for PPPs.

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Section: Growthmentioning

confidence: 90%

Profitability determinants of infrastructure public private partnerships (PPPs): empirical evidence from Indian data

Kumar

Srivastava

Tabash

et al. 2021

JFMPC

View full text Add to dashboard Cite

show abstract

“…It is used to establish a negative relationship between shareholder value and the higher proportion of debt component in the capital structure of Indian companies. Kakani and Kaul (2002) explained that higher leverage or poor solvency position reduces a firm's financial flexibility, apart from increasing its financial and bankruptcy risk. It implies that a higher debt component in the capital structure puts extra pressure of fixed interest burden on the firms.…”

Section: Unsystematic Riskmentioning

confidence: 99%

“…Newer and smaller firms, as a result, take away market share in spite of disadvantages like lack of capital, brand names and corporate reputation with older firms. Kakani and Kaul (2002) found that older firms are unable to react quickly to the recessionary phase while the younger companies are a lot more agile and open to the opportunities that come with the opening up of the sector that helps them to adapt changing trends and customer preferences. Raman and Dangwal (2003) also identified that the continuous use of outdated management and marketing practices along with the obsolete technology used by older firms are the main causes of their lesser growth.…”

Section: Framework Of Analysismentioning

confidence: 99%

Impact of Firm-specific Attributes on Shareholder Value Creation of Indian Companies: An Empirical Analysis

Narang¹,

Kaur

2014

Global Business Review

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This exploratory study attempts to discover the impact of firm-specific characteristics on the shareholder value of the listed companies in India. Apart from this, it seeks to explore whether the significant firm attributes are common to both the dimensions of shareholder value, that is, accounting-based (economic value added (EVA)) as well as market-based dimensions (market value added (MVA) and Tobin's Q). . Multiple regression analysis is employed to study the relationship. The study reveals that investors tend to reward the companies which have higher profitability, lower market risk, efficient resource management, high leverage, more liquidity, higher marketing expenditures and robust market capitalization. Evaluating shareholder value on the basis of accounting and market-based dimensions, the study identifies that the selected corporate attributes explain about 34 per cent of the variation in the accounting-based surrogate EVA, whereas they account for more than 55 per cent variation in the firm's shareholder value when it is measured on the basis of marketbased surrogates, MVA and Tobin's Q. The primary limitations of this study are the size of its sample and non-inclusion of other variables (for example, market, environmental, regulatory, etc.) which may have an effect on the shareholder value. As maximizing shareholder value has become the widely accepted corporate objective the world over, its enhancement has become the key responsibility of corporate executives and managers.

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Impact of Firm-specific Attributes on the Shareholder Value Creation of Listed South African Companies

Nieuwoudt

Hall

2022

Global Business Review

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This article identifies firm-specific attributes with a substantial impact on the capabilities of listed South African companies to create shareholder value. It shows that the firm-specific attributes that contribute to shareholder value creation differ when value is measured using economic-based shareholder value measures, such as Economic Value Added (EVA) and Market Value Added (MVA), versus using accounting-based shareholder value measures, such as earnings per share (EPS). Data cover financial years from 2000 to 2018 for 35 JSE-listed companies. Multiple regression analysis is employed to study the relationships. The study revealed different results on shareholder value creation utilizing accounting-based and economic-based performance measures. Shareholder value measured by EVA is created by larger companies with higher profitability, lower systematic risk and efficient asset management. MVA identifies increased shareholder value for larger firms and higher profitability. MVA also pinpoints enhanced investor value by firms with lower liquidity ratios which invest less in research and development (R&D). EPS achieved different results from EVA and MVA, indicating that according to accounting-based measures, companies add value through lower profitability (measured by return on investment), efficient asset management and a higher risk profile. Understanding the effect of firm-specific attributes on shareholder value creation can assist managers in developing strategies and decision-making.

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Firm Performance and Size in Liberalized Era: The Indian Case

Cited by 4 publications

References 10 publications

Profitability determinants of infrastructure public private partnerships (PPPs): empirical evidence from Indian data

Profitability determinants of infrastructure public private partnerships (PPPs): empirical evidence from Indian data

Impact of Firm-specific Attributes on Shareholder Value Creation of Indian Companies: An Empirical Analysis

Impact of Firm-specific Attributes on the Shareholder Value Creation of Listed South African Companies

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