R Madhumathi

Influence of institutional ownership has been hypothesised to efficiently monitor the managerial decisions especially discretionary role of managers in reporting earnings. The managers have been found to misrepresent the quality of earnings for a dividend declaration; new issue; takeovers and for affirming debt holders of their financial position. Panel data methodology focusing on firms listed in CNX 500 in National Stock Exchange empirically examines the impact of institutional ownership on the earnings management practices in India. Earnings management is measured using discretionary accounting accruals. Firms with higher institutional holdings are found to have higher earnings quality thus restricting managers from using their discretionary powers to report earnings. Institutional ownership has a negative relationship with earnings management for larger and matured firms. Growing firms are found to be having higher earnings management. Institutional investors monitor the firms and hence reduce aggressive earnings management practices within the firm. Foreign institutional ownership also has a negative relationship with earnings management.

This paper aims to explore the links between systems of human resource management practices and the firm performance in India. Content analysis of the annual reports was done to identify the human resources attributes disclosed by a sample of 165 large sized firms in India. The financial performance measures were collected from the Prowess database. Regression analysis was used to examine the effect of the human resource management system on the financial performance of the firm. Reverse causal effect of financial performance on the human resource management system was also examined using regression analysis. The study found that the human resource management practices have statistically significant impact on the measures of firm financial performance. The reverse causal relation showed that the financial measure market capitalisation has a significant and positive influence on the human resource management practices.

The diverse system of corporate governance in some of the developed and the developing countries around the world has been studied. In most of the countries, the committees that are present in common are: audit committee, compensation and nominating committees. Boards are unitary in nature in the United States and in the United Kingdom. Establishment of remuneration committee became active after being insisted in Greenbury report in the U.K. There is either a unitary system of governance or two tier systems with the management committee and the supervisory committee. Two tier board structure has been followed in most of the firms in Germany. In Hong Kong there is an outsider system of governance with an insider mould. Family ownership is predominant in Hong Kong. Malaysian system of governance is insider-oriented and is controlled by the founding families. Board structure is one tier in nature. Governance code recommends a board with only independent directors in Malaysia especially nominating committee. India has a one tier board structure. Significant differences persist in the corporate governance practices of countries studied in this research paper.

Corporate governance has greater relevance especially in the wake of financial turmoil spillover effects to other countries across the economies. Specific governance characteristics such as board structure, board size, identification of board members and committees constituting governance board are differentiated across selected countries. This study examines four factors namely economic status, legal system, democratic status and culture. The regulatory requirement specified by each country in the sample is analyzed examining the similarities and differences identified. The research hypotheses were analyzed using Kruskal Wallis test. System of corporate governance is influenced with respect to compliance of legal system across countries. Number of committees present in the governance board differs with respect to the legal system and democratic status followed across countries. Regulatory compliance of financial expertise of directors and other specific criteria of audit committee members have been differentiated by factors such as economic status, legal system and democratic status.

The literature in the field of sustainable development (SD) of businesses is piecemeal and diverse. This paper identifies and integrates principles that businesses could use for transformation towards SD. This is done through analogical reasoning from the source context of ecological systems to the target contexts of business socio-economic systems and machine/technology systems. The methodologies of systems thinking and morphological analysis supplement the analogical reasoning. Based on this, twelve principles for sustainable development of business are inferred for business managers and policy makers. © 2012 Indian Institute of Management Bangalore.

Purpose – The purpose of this paper is to empirically examine the impact of earnings management on capital structure across firm diversification strategies. Design/methodology/approach – The study focuses on firms operating in the manufacturing sector (diversified and focused). Panel data methodology compares diversification strategies and identifies the impact of diversification strategy with earnings management practices on capital structure decision. Findings – International and product diversified firms have lower levels of leverage than focused firms in their capital structure. Asset-based earnings management is positive for diversified (market/product) firms. Earnings management using discretionary expenditure (project based) is found to be higher for market diversified but product-focused firms. Earning smoothing method is found to be significant for focused firms and shows a negative relationship with capital structure. Originality/value – This study offers an insight into the relationship between corporate diversification, earnings management and capital structure decisions of manufacturing firms. The results provide an important contribution to accounting and strategy literature. A distinction is made between market- and product-diversified firms and influence of earnings management practices (asset-based, project-based and earnings smoothing (ESM)) on capital structure decisions. Diversified firms (market/product) tend to have lower levels of leverage than focused firms and earnings management practices within firm groups significantly influence the capital structure decisions.