Department of Management Studies
Indian Institute of Science, Bangalore-560012
Speaker: Dr. V. Ravi Anshuman
Venue: Seminar hall
Date & Time: 04/11/2022 at 2:00 PM
Coffee/Tea @ 3:30 PM
Abstracts of two studies:
1. Regulatory Impact of Minimum Public Shareholding Rule
In March 2010, the Securities and Exchange Board of India (SEBI) mandated that all listed firms in India should henceforth hold a minimum of 25% public investors. The intent of this regulation was to improve liquidity and curb price manipulation, leading to a reduction in the cost of capital. In this study, we analyze the exogenous shock to the distribution of voting rights caused by the regulation and estimate its impact on liquidity and price manipulation. Using a difference-in-difference approach, we find that there is no improvement in liquidity and price manipulation for firms that responded to this regulation. We analyze this issue further and establish that the minimum cut-off for public float used in the regulation (in this case, 25%) is a critical determinant of liquidity and price manipulation. Our findings indicate that a minimum public float cut-off between 30% to 50% is required to generate improvements in liquidity and price manipulation.
2. Bankruptcy Exemption of Repo Contracts
We examine the desirability of granting of “safe harbor” provisions to the sale and repurchase (repo) markets, i.e., granting repo contracts exemption from the automatic stay in bankruptcy. Such exemption can enable financial intermediaries to raise greater liquidity and operate at higher leverage in normal times. This liquidity creation occurs, however, at the cost of ex-post inefficiency when there are adverse aggregate shocks to the fundamental quality of collateral underlying the contracts. When exempt from bankruptcy, creditors of highly leveraged financial intermediaries respond to such shocks by engaging in collateral liquidations. Financial arbitrage by less leveraged financial intermediaries equilibrates returns from acquiring financial assets at fire sale prices and those from real-sector lending, inducing a rise in lending rates, a deterioration in endogenous asset quality, and in the extremes, a credit crunch for the real sector. Given this inefficiency, an automatic stay on repo contracts in bankruptcy can be not only ex-post optimal but also ex-ante optimal, especially for illiquid collateral with high exposure to aggregate risk.
Brief Bio: V. Ravi Anshuman
Education: Ph. D. in Finance, University of Utah; B. Tech, Indian Institute of Technology, Kanpur.
V. Ravi Anshuman is a Professor of Finance in the Finance & Control Area of the Indian Institute of Management Bangalore. Prof. Anshuman’s research interests cover the areas of market microstructure, capital markets, and corporate financial management issues in emerging markets. His publications have appeared in the Review of Financial Studies, Journal of Financial Economics, Journal of Financial Markets, etc. He has co-authored the international edition of the book titled Valuation with Sheridan Titman and John Martin. He has held academic positions at Boston College and visiting academic positions at the Hong Kong University of Science and Technology, the Indian School of Business, and The University of Texas at Austin. He has served on committees at the National Stock Exchange (NSE), the Reserve Bank of India (RBI), the Securities Exchange Board of India (SEBI), and the Ministry of Finance (India). He is currently serving as a (part-time) member of the SEBI Board.
ALL ARE WELCOME