Journal: Journal of Corporate Finance

Abstract: In recent years, the lack of diversity in corporate boards has garnered considerable attention. Several measures have been proposed to diversify corporate boards, with a key principle being that diversity of identities and backgrounds brings diversity of perspectives and attitudes. This paper measures social diversity using a relatively unexplored instrument which relates deeply to people’s sense of identity. In particular, the authors focus on diversity of religion and caste – an informal social institution that divides India’s Hindu society into hundreds of communities. 

The findings of the paper reveal that India’s corporate boards are strikingly homogeneous (i.e. lack diversity) in their religious and caste composition. The paper then asks how this lack of diversity is associated with firm outcomes and shows that firm performance is negatively related to social homogeneity of boards. In addition, the research delves into plausible mechanisms underlying this effect. The evidence is consistent with the notion that socially homogeneous boards are less likely to offer novel perspectives (thus impairing their advisory role) or challenge management (thus impairing their monitoring role) thereby adversely affecting firm performance outcomes. 

The paper develops a novel computational methodology to come up with a data driven mapping of last names to social identity at three levels of granularity – religion, coarse- and fine-grained caste. This method helps in  mapping 16,637 unique last names into eight religions, five coarse-grained castes, and 471 distinct fine-grained castes. 

The relationship between diversity of boards and firm performance ex ante is unclear. On one hand, homogeneous board members may not bring a wide range of perspectives to bear upon the decisions they make for the firm, worsening their advisory roles. They may also be more prone to cronyism (which refers to their inability to challenge the firm’s management and have tough conversations needed to improve firm performance), hurting their monitoring role and, hence, the firms they serve. On the other hand, socially homogeneous directors may have greater trust, which reduces conflicts during strategy execution, thus improving firm performance. Regression analysis, therefore, provides with estimates of the net effect of these mechanisms. The authors find using several instrumental variable analysis that social homophily on boards adversely impacts firm performance. 

Finally, the  moderation tests (implemented using interaction terms in a regression framework) provide suggestive evidence for mechanisms through which high caste homogeneity on boards adversely affects firm performance. It is shown that firms with homogeneous boards fare even worse than others during slow GDP growth years. This finding is consistent with the possibility that caste homogeneous boards’ overlapping external networks and viewpoints inhibits them from providing novel and useful advisory input to the firm precisely when such advice is needed for improving firm performance. Next, it is shown that firms with homogeneous boards perform even more badly when key board committees that impact the board’s monitoring role have an over-representation of the dominant caste.

Taken together, these findings are consistent with the possibility that caste homogeneity makes it less likely that boards effectively discharge their monitoring role of challenging management’s actions, thereby leading to poor firm performance. Overall, the authors interpret these patterns of findings as consistent with the notion that caste homogeneity on the board causes poor firm performance in part because homogeneity inhibits the efficacy of boards’ monitoring and advisory roles. 

Abstract: The time-series of COVID 19 incidence rate widely varied based on geographical locations. This happened not only because of epidemiological factors, but also due to different government policies and in general human mobility in response to that. In this article, the authors propose a new clustering algorithm for analyzing such spatio-temporal data. In particular, their target datasets are such where they could observe time-series in each geographical location, be it at county, state or country level and then try to perform an unsupervised clustering of these locations based on the similarity of the series observed in them.

The proposed method leverages a weighted combination of a spatial haversine distance matrix and a spectral-density based temporal distance matrix between the locations. Concepts of partition around medoids algorithm and the gap statistic are utilized to develop the algorithm and to determine the optimal number of clusters. Such a non-parametric algorithm is novel as it incorporates both spatial and temporal distances of the units and it can work for time-series of possibly different lengths. Theoretical guarantee of consistency of the proposed method is provided. An elaborate simulation study is also given to demonstrate the efficacy of the algorithm.

Next, the proposed algorithm is implemented to analyze the spatio-temporal dynamics of the time series of coronavirus (COVID-19) incidence rates observed at county-level in the United States of America. They collected time-series of 3190 counties across contiguous USA for a 15-month period from 22 January,2020 to 31 March, 2021. They first applied an existing method of clustering that is based on similarity of auto-correlation function in these counties. The results performed both on all 3190 counties and at a more local level were difficult to interpret since the resulting clusters were barely connected. Next, they applied their methods and demonstrated on datasets of different sizes: the entire country, the Midwest region and the state of California. They emphasized the last two and discussed how the clustering results offer interesting insights into the epidemic progression in these areas. Particularly, they were able to shed light on whether state-mandated restrictions impacted the entire state similarly or if there were interesting local behaviors in terms of the COVID-19 spread. In the supplementary materials, they analyzed another spatiotemporal data of temperature recorded in Southern part of India and saw that their clusters clearly showed effects of terrain, vegetation and proximity of water body.

Journal: Energy Economics

In the context of two of the most crucial incidents of this decade, the COVID-19 pandemic and the Russia-Ukraine conflict, the authors address the important question of whether the economic impacts of these two events are the same on various energy and non-energy assets. 

Their study focuses on a comparative analysis of the S&P500 index, bitcoin, gold, crude oil (Brent and WTI) and natural gas market in terms of their market efficiency and interconnectedness during the pandemic and the war. 

They deploy a novel methodology that utilizes the wavelet decomposition of time series, which facilitates capturing information both in the time and frequency domain. They begin with analyzing the market efficiency behavior with the help of a combined index based on information gathered from several time scales. Next, the inter-dynamics of the markets are studied separately for different investment horizons. They study the market interconnectedness through wavelet coherence, while the return and volatility spillover are analyzed using a VAR and vector-valued GARCH model, respectively.

Their analysis suggests that the energy sector is impacted more than the non-energy sector in times of both the crises, although the nature of the impact is different. Interestingly, the energy market is more vulnerable in terms of market efficiency during both war and pandemic as compared to the assets of the non-energy market. The crude oil sector, in particular, seems to be more affected by the crises than natural gas. In terms of efficiency, bitcoin suffers the least during both crises while gold endures slightly only during the pandemic, thereby supporting the existing literature on gold and bitcoin being regarded as safe assets in times of economic turmoil. S&P500, in comparison, seems to be affected by both the events, although the impacts persist only for a brief period before the market starts to retain its efficiency. All the markets other than crude oil appear to be in a recovering state from the Russia-Ukraine crisis in recent times.

On the other hand, regarding spillover dynamics and interconnectedness, they observe higher co-movement in lower frequency regions and higher spillover in higher frequency scales. The crude oil sector interacts the most between each other, both in terms of price and volatility spillover. In fact, volatility spillover seems to increase around the time of the war at times. Despite being an energy sector asset, natural gas shows similar volatility spillover with both the crude oils. The stock market and the bitcoin market are generally found to be the transmitters of volatility spillover towards both Brent and WTI during the pandemic, but often the asymmetric effects spillover seem to increase between the crude oils (especially WTI) and gold around the time of the war.

Since the market states matter more than an investment decision in corporate investments, understanding the reaction of each of the markets to different types of crises is of equal importance to investors and policy makers. To that end, the authors believe the results of this study would help investors to choose a safe market and plan their portfolio accordingly during a crisis. Further, from a methodological standpoint, they believe that the use of wavelet decomposition in a unified framework to analyze different aspects of markets can potentially be extended effectively in similar economic studies.

IIM Bangalore’s digital learning initiative IIMBx hosted the valedictory ceremony of the ‘Professional Certificate Programme in Hospital Management’ Batch 1, on 22^nd September 2023. More than 100 learners of the one-year, online programme received their certificates from Dr. Devi Prasad Shetty, Chairperson, Board of Governors, IIM Bangalore, who was the Chief Guest at the event.

The Mizuho India Japan Study Centre (MIJSC) at IIM Bangalore hosted a webinar titled, ‘How Might AI Reshape Society? Global Case Studies including Indian & Japanese Experiences’, as part of its panel presentation series: ‘Meijin-Samvad’, that is, ‘Expert-Conversation’, on 19^th September 2023. The ‘Meijin-Samvad’ discussion series involves a select group of panelists from India and Japan, who share different perspectives on a particular topic, with a larger audience.

MGNF Fellow Pallavi Mishra is engaged with the Dhenkanal district in Odisha in providing significant and meaningful support to the district administration to improve the skill development program delivery.

A paper titled, ‘Navigating Temporary Organizations: A Narrative Perspective’, co-authored by Dr. Srivardhini K Jha, Chairperson, NSRCEL and faculty of the Entrepreneurship area of IIMB; Dr. Gopal Naik, Chairperson, Centre for Public Policy (CPP), IIMB, and Jothsna Rajan (IIMB PhD, 2019), has been accepted for publication in the Journal of Management Inquiry.

The paper is from Jothsna Rajan’s thesis work. The empirical setting for the study is a public-private partnership that was orchestrated by CPP/Prof. Gopal Naik.

Abstract of paper: Temporary Organizations (TO) can be viewed as collection of narratives about the past and the future, that can potentially shape organizational outcomes. An in-depth, longitudinal study of a time-bound interorganizational project that served rural India’s educational needs shows how multi-authored narratives and practices in temporary organizations influence each other. When the narratives are coherent with respect to the past and the future, the actors engage in mitigative practices, and the project develops. If the narratives diverge, the actors engage in self-serving practices hindering the project. The narrative view affords a novel lens to understand the dynamics shaping practices and outcomes within temporary organizations. The research findings also have practical implications for TO management, understanding the plurality of narratives and emphasizing the importance of aligning them.

The case traces the genesis and growth of Ganga Hospital, a trauma care center in Coimbatore, which is an industrial hub in South India. The case presents a study in contrasts. In a landscape that is dotted with multi-specialty hospitals, Ganga has chosen to provide niche trauma care. The decision to differentiate in the prevailing circumstances of the day amounts to a disruption and highlights important management and strategy issues. Dr. Shanmuganathan, the founder of Ganga, started his career in 1956 as a general practitioner. He dreamed of becoming a surgeon but was limited by his resources. An opportunity arose for him to travel to England, where he trained to be an anaesthetist. Returning to India in 1970, he started a five-bedded facility in Coimbatore, where surgeons could operate on their patients. Anaesthesia was a support function, and not the main specialty during surgery. Even so, the doctor hoped to start a hospital of his own. The economic policy environment of India during the 1970s had no institutional support for entrepreneurs to establish hospitals. Mrs. Kanakavalli Shanmuganathan was financially astute; she mobilized the resources to commission Ganga Hospital in 1978. The sons of the couple enrolled in medical studies and completed their super-specialization abroad. The elder son, Dr. Raja Sabapathy, trained to be a plastic surgeon; his brother, Dr. Rajasekaran became an orthopaedic surgeon. The triad of their specialties placed the founder and his sons in the sweet spot of trauma care. Setting aside job offers abroad, the brothers returned to Coimbatore in 1991, and picked up the reins of the hospital. Over the next three decades, they expanded Ganga from a polyclinic with 17 beds and two operation theatres (OTs), to a trauma care center with 600 beds and 40 OTs. To complete the cycle of caregiving, facilities were built for rehabilitation. By 2022, there were 230 salaried doctors, plus a support staff of 1,200 on the payroll.

The case highlights the central role that the Ganga family has played in establishing, running, and growing the hospital in an ethical way. It describes the contingencies that drove decisions about expansion made by the Ganga founder and directors. The narrative illustrates issues confronting hospitals that choose to expand primarily in response to patient demand. This is in stark contrast with investor-funded ventures that have come to dominate the landscape of Indian healthcare.

Weightlifting champion Khudsiya Nazeer delivered a talk on, ‘The Significance of Sport in Life: Glimpses from My Journey’, during the prize distribution ceremony marking the finale of the National Sports Week 2023, held by IIM Bangalore on 31^st August 2023. The activities were conducted in line with the National Sports Day held across the country on 29^th August, as part of the Fit India initiative of the Government of India.

Khudsiya Nazeer is a national and world record holder in weightlifting and is the International Masters Weightlifting Champion. She is the first woman in the world to hold this world record. She has bagged many gold medals in state and national weightlifting championships. In May 2023, she represented India in South Korea in the Asia Pacific Masters Weightlifting Championship where she won three gold medals and made India proud. She has been honored with state, national and international awards for her outstanding achievements.

A book titled, ‘A Heads-Up For Your Startup: Embrace the Unknown Journey’, authored by IIM Bangalore alumnus Prasad SN (EGMP62, 2022-2023 batch), has been published recently.

The book provides insights and guidance on preparing the mindsets of first-time and aspiring entrepreneurs, for the challenges and rewards of entrepreneurship. It is ideal for those who aspire to embark on the transformative journey of entrepreneurship, discovering the art of balancing ambition and practicality.