ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Arindam BandyopadhyaySubscribe to Arindam Bandyopadhyay

How Should Banks Estimate Their Expected Loan Loss Provisions to Survive in Difficult Times?

This article explains how banks can use their forward-looking internal credit risk estimates and apply on loan cash fl ows over different time horizons and assess the impact on loss provisions. Such an estimate based on longer historical data will enable the banks to better foresee the uncertainty pertaining to repayment status of their loans and make loss provisions in a more proactive manner.

The Accuracy of Agency Ratings

Recently, regulators as well as market participants have raised serious concerns about the validity of external credit ratings in predicting the true status of corporate default risk in India. A comparison is made of the historical rating trends in India along with the global benchmarks. The credit rating agencies need to provide more insights about corporate rating movements to enable banks to derive early warning signals about inherent credit risk. The kind of risk indicators that need to be disclosed has been highlighted.

Effect of Capital Structure on Firms' Product Market Performance

This paper empirically examines the effect of a firm?s capital structure on its product market outcome. The strategic consideration in the product market may induce Indian corporates to take on higher debt in order to gain strategic advantage. Using a balanced panel of 538 Indian manufacturing firms over the period 1989 to 2000, the paper studies the relationship between short- and long-term debt and sales performance (export as well as total sales). In the case of long-term debt, firms take time to build their infrastructure. Hence, considering a longer time horizon of two years and seven years of taking the loan, the paper finds that long-term debt boosts sales growth of firms belonging to the top 50 and large business houses. However, long-term debt is inconsequential for total growth of sales for smaller group and unaffiliated firms. The study finds empirical evidence on the interplay between the financial structure and product market performance in the Indian corporate sector.
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