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Abstract:
In this paper the performance evaluation of Indian mutual funds in a bear market is carried out through relative performance index, risk-return analysis, Treynor's ratio, Sharp's ratio, Sharp's measure, Jensen's measure, and Fama's measure. The data used is monthly closing NAVs. The source of data is website of Association of Mutual Funds in India (AMFI). Study period is September 98-April 02 (bear period). We started with a sample of 269 open ended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding the funds whose returns are less than risk-free returns, 58 schemes were used for further analysis. Mean monthly (logarithmic) return and risk of the sample mutual fund schemes during the period were 0.59% and 7.10%, respectively, compared to similar statistics of 0.14% and 8.57% for market portfolio. The results of performance measures suggest that most of the mutual fund schemes in the sample of 58 were able to satisfy investor's expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk.

mutual funds, performance evaluation, risk-return analysis

Abstract:
This study presents empirical evidence on the determinants of the capital structure of non-financial firms in India based on firm specific data. A comparative analysis is done for pre-liberalization and post-liberalization periods. The study period and sample firms for pre-liberalization period are 1990-1992 and 498, respectively. The same for post-liberalization period are 1997-1999 and 1411. Empirical results imply that tax effect and signaling effect play a role in financing decisions where as agency costs effect financing decision of big business houses and foreign firms. It is also revealed that size of the firm and business risk became significant factors influencing the capital structure during post-liberalization period.

capital structure, tax effects, signaling effects, agency costs

Abstract:
We observe significant valuation revisions around divined changes. The price reaction to dividend initiations and omissions are more compared to the dividend increase/decrease sample. We analyze the relationship between dividend changes and future profitability/earnings using categorical analysis and regression analysis. There is a strong relationship between the dividend changes and earnings/profitability changes for the corresponding year. Dividend initiating (omitting) firms have large increase (decrease) in profitability in the year of change compared to dividend increasing (decreasing) firms. We found that dividend changes provide information about the level and change in profitability in the immediately succeeding year, but not thereafter. The availability of financial results for the next quarter/half year may discount the signaling argument as a valid explanation. Generally positive dividend changes are associated with somewhat permanent increase in earnings in the year of announcements.

Dividend, signaling, earnings, profitability

Abstract:
This paper investigates the operating performance behavior around bonus distribution for a large sample of firms listed on Bombay Stock Exchange (BSE) to examine the relevance of signaling hypothesis in India. Previous work in this area with Indian data sets has focused on share price behavior around bonus issue. Consistent with the signaling hypotheses, bonus issuers exhibit superior operating performance relative to control firms with similar pre-event performance. The operating performance of firms issuing bonus shares is superior to their industry peers both prior to and subsequent to the bonus issue. We link the impact of corporate control mechanism on signaling by documenting the relationship between ownership-structure and post bonus issue operating performance. Further, we examine announcement return and its relation with firm specific variables.

Stock Dividend, Bonus Issue, Signaling, Operating Performance, Event Study and Ownership Structure, Indian Capital Market

Abstract:
We examine long-run stock returns and operating performance following stock dividend payment by Indian firms from 1991 to 2000. Consistent with the signaling hypotheses, these firms report significant positive announcement return and superior operating performance. Our evidence establishes that the superior performance of bonus issuers is because of the better profit margin they are able to generate in comparison to matching firms during the post-issue period. We also document that announcement of bonus equity shares are associated with increase in future cash dividends. Further we examine the long-run stock return in comparison with a carefully constructed matching portfolio and the significance levels are arrived after comparing with bootstrapped empirical distribution of abnormal return from pseudo portfolios. In contrast to the results from the US markets, the equal weighted as well as value weighted abnormal returns are insignificant. But value weighting is showing positive abnormal returns indicating a delay in the market reaction for large firms.

Bonus equity issue, stock dividend, valuation, long-run stock performance, operating performance, information asymmetry, ownership structure

Abstract:
In the Indian market, majority of the subsequent equity issues are sold through rights offerings (ROs) and ROs are associated with positive market reaction. We show that this positive reaction is mainly concentrated among growth firms having better investment opportunity. In the long-run, issuers under-perform a carefully selected matching portfolio. This underperformance is significant in comparison with a bootstrapped empirical distribution of pseudo portfolios. This evidence is robust to various estimation procedures and statistical tests. It is interesting to note that the operating performance measures also behave similarly and it is significantly related to the stock performance. Our analysis establishes that agency costs and over-investment hypothesis can better explain the deteriorating performance.

Rights equity issue, long-run stock performance, operating performance, investment opportunity, information asymmetry, ownership structure, market efficiency

Abstract:
In this paper we analyze operating performance of BSE listed manufacturing firms following rights equity issue and its linkages with firm specific characteristics as hypothesized in the finance theory. Consistent with empirical results for seasoned equity offerings in the US market, there is statistically significant decline in the operating performance after the rights equity issue. This decline in performance is more severe for big firms, low market to book value firms and firms with lower directors' holdings. We found that the decline in performance is due to the inefficiency in utilization of assets and not due to decrease in profit margins. Further, various proxies measuring market valuation also declined during the post-issue period after a run up in the pre-issue period. Our results suggest that compared to asymmetric information hypothesis, over-investment hypothesis and agency models can better explain the decline in performance and rights equity issues are not simple de-leveraging decisions.

Rights equity issue, Seasoned equity issue, Operating performance, Investment opportunity, Information Asymmetry, Ownership Structure, India

Abstract:
Earnings management occurs when managers use judgment in financial reporting and in structural transactions to alter financial reports to either mislead some stakeholders about the underlying performance of the company, or to influence contractual outcomes that depend on reported financial performance. Many research studies are conducted to investigate the earnings management in developed economies. Due to regulated operating environment of in India until 1992 earnings management was not a fertile topic for research. But, post-1992 companies are given freedom to price their capital issues. This freedom motivates the issuers to manage their earnings prior to capital issues.

The objectives of the study are to investigate if firms in India manage earnings prior to launching of equity rights issues (known as seasoned equity offerings in the USA and Europe) and the post issue performance of the firms. We used discretionary current accruals (DCAs) to measure the extent of earnings management. Modified Jones Model is used to estimate DCAs during three years prior to the rights issue (pre-issue period) and three years after the rights issue (post-issue period). DCAs of rights issue firms are adjusted for DCAs of control sample (non-rights issuers).Adjusted mean DCAs of pre-issue period is compared with adjusted mean DCAs of the post-issue period to detect earnings management. The results suggest that there has been earnings management prior to the rights issues. Analysis of pre-and-post issue performance the sample firms corroborate the findings based on DCAs. Study period is 1993-94 to 2003-04. Sample size is 259.

earnings management, discretionary current accruals, performance

Abstract:
Earnings management occurs when managers use judgment in financial reporting and in structural transactions to alter financial reports either to mislead some stakeholders about the underlying performance of the company, or to influence contractual outcomes that depend on reported financial performance. Many research studies have been conducted to investigate the earnings management in developed economies. Due to the regulated operating environment in India until 1992, earnings management was not a fertile topic for research. But, post-1992, companies are given freedom to price their capital issues. This freedom motivates the issuers to manage their earnings prior to capital issues. The objective of the study is to investigate if firms in India manage earnings prior to their launching of equity rights issues. The study uses Discretionary Current Accruals (DCAs) to measure the extent of earnings management. Modified Jones Model is used to estimate the adjusted DCAs during the three years prior to the rights issue (pre-issue period) and three years after the rights issue (post-issue period). The DCAs of rights issuing firms are adjusted for DCAs of control sample (non-rights issuers). Adjusted mean DCAs of pre-issue period is compared with adjusted mean DCAs of the post-issue period to detect the earnings management. The results suggest that there has been earnings management prior to the rights issues. The study period is from 1993-94 to 2003-04, and the sample size is 259.