The Journal of Institute of Public Enterprise

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Jan – June, 2013

Vol : 36, No : 1

&2

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EBSCO

Ensuring Accountability in State-owned Enterprises : Examining the Role of Annual Reports from

a Middle Income Country’s Perspective

Capital Structure, Leverage and Financing Decision : An Empirical Analysis of Selected Public Sector Oil and Gas Companies in India

Chitta Ranjan Sarkar & Aniruddha Sarkar

Sasirekha V

Jan – June, 2013Vol : 36

( ISSN 0971 - 1856 )

Institute of Public EnterpriseThe Journal of

No : 1 & 2

Hadija N.Odainkey Samuel N.Y.Simpson&

Optimal Portfolio Construction by Using Sharpe’s Single Index Model (An Empirical Study on Stocks of Some

Selected Public Sector Enterprises in India)Dr.Niranjan Mandal

Public Procurement – Case Study of the Indian RailwaysBodhibrata Nag

Economics of Barge-Based Inland Container Transportation : The Case of Southern Kerala

D.Rajasenan Rajeev, B.&

An Unfulfilled Dream Lantern to Electric Lamp

Shree Raman

Arunachal Khosla

A Comparative Study of Differences in Organisational Culture of Public and Private Sector Banks

Requirements Analysis for Disaster Recovery Plan at Integral Coach Factory,

Chennai

Vol : 36 Jan – June, 2013 No : 1 & 2

Content

International Perspective★ Ensuring Accountability in State-owned Enterprises : Examining

the Role of Annual Reports from a Middle IncomeCountry’s PerspectiveHadija N.Odainkey & Samuel N.Y.Simpson ........................................1

Research Papers★ Optimal Portfolio Construction by Using Sharpe’s Single Index Model

(An Empirical Study on Stocks of Some Selected Public SectorEnterprises in India)Dr.Niranjan Mandal .............................................................................21

★ Public Procurement – Case Study of the Indian RailwaysBodhibrata Nag ....................................................................................45

★ Economics of Barge-Based Inland Container Transportation :The Case of Southern KeralaD.Rajasenan & Rajeev, B. ..............................................................................71

★ Capital Structure, Leverage and Financing Decision : An EmpiricalAnalysis of Selected Public Sector Oil and Gas Companies in IndiaChitta Ranjan Sarkar & Aniruddha Sarkar .......................................89

★ A Comparative Study of Differences in OrganisationalCulture of Public and Private Sector BanksArunachal Khosla ...............................................................................104

Research Note★ Requirements Analysis for Disaster Recovery Plan at

Integral Coach Factory, ChennaiSasirekha V .........................................................................................117

★ An Unfulfilled Dream Lantern to Electric LampShree Raman .......................................................................................128

The Journal of Institute of Public Enterprise

Ensuring Accountability in State-owned Enterprises : Examining the Roleof Annual Reports from a Middle Income Country’s Perspective

1

Ensuring Accountability in State-ownedEnterprises : Examining the Role of

Annual Reports from a MiddleIncome Country’s Perspective

Hadija N.Odainkey* & Samuel N.Y.Simpson**

State-owned Enterprises (SoEs) in developing countries have been the leading beneficiariesof several reforms in attempts to make them more accountable, thus ensuring efficiency andeffectiveness in their operations. This is because SoEs have been recognized as one of the keycontributors to the socio-economic development in developing economies. One of the keytools identified for ensuring accountability is their annual report. However, evidence on therole the annual report plays has been mixed. This study contributes empirically to the literatureon the role of annual reports of SoEs, in the light of reforms using evidence from Ghana.

* Hadija Odainkey, Department of Accoun-ting, University of Ghana Business School,Legon-Accra, Ghana.

** Samuel N.Y.Simpson, Department of Accoun-ting, University of Ghana Business School,Legon-Accra, Ghana.

Introduction

There have been increasing calls for thepublic sectors in many developingnations including Ghana to providequality public services that meet theneeds of its citizens, be more accoun-table for its decisions and actions and tomanage resources more prudently,while they foster private market-ledgrowth. These calls have been made onaccount of the essential role the sectorplays and the contribution it brings tothe development process, especially indeveloping countries (Hemming &Mansoor 1988). State-owned Enter-prises (SoEs) which are part of the pub-lic sector, have significant impact on keyeconomic indicators such as GrossDomestic Product (GDP), emp-loyment and others, especially in the

Keywords : Accountability, Annual Reports, SoEs, Ghana

Middle East, Asia and Africa (Kumar[n.d.]). In Singapore, SoEs account forabout 21.8 per cent of GDP. In Asia,SoEs contribute 8 per cent of GDP(Sobhan 2010) whereas in Indonesia,SoEs total assets amounted to 40 percent of GDP with contributions to thestate budget amounting to 12 per centof budget revenue (Abubakar 2010).

For developing economies in Africa, thesignificance of the public sector cannotbe overemphasized as the sector con-tinues to be the largest spender andemployer in virtually every economy

The Journal of Institute of Public Enterprise, Vol. 36, No. 1&2© 2013, Institute of Public Enterprise

Optimal Portfolio Construction by Using Sharpe’s Single Index Model

21

Dr.Niranjan Mandal*

In this research article an attempt has been made to explore the idea embedded in SIMand to construct an optimal portfolio empirically using this model. Considering daily indicesof BSE sensex as MPI along with the daily stock prices of the ten selected public sectorenterprises for the period of April 2001 to March 2011, the proposed mechanism formulatesa unique cut off rate and selects securities having ‘excess-return to beta’ ratio greater than orequals to the cut off rate. To arrive at the optimal portfolio, proportion of investment in eachof the selected securities is computed on the basis of its beta value, unsystematic risk, risk freerate of return excess-return to beta ratio and cut off rate. It is found that SIM gives an easymechanism of constructing optimal portfolio and requires lesser input than the inputrequirement of Markowitz's model to achieve the risk and return of the optimal portfolio. Itis also observed that there is a significant difference between the total risk of the optimalportfolio under SIM and that of under Markowitz’s model.

* Dr.Niranjan Mandal, M.Com, MLIS, M.Phil(Commerce), PhD (Economics), Associate Professor,Department of Commerce, Dr.BhupendranathDutta Smriti Mahavidyalaya, Affiliated to theUniversity of Burdwan,Wesr Bengal – 713407,India.

Keywords : Portfolio Construction, Sharpe’s Single Index Model, Return and Risk,Risk Characteristic Line, Optimal Portfolio, Diversification, Cut off Rate.

Introduction

Harry Markowitz, in early 1950’s, deve-loped a comprehensive model in whichhe made a simple premise that almostall investors invest in multiple securi-ties rather than a single security forobtaining benefits from the investmentin a portfolio consisting of differentstocks. In this theory, he tried to showthat the variance of the rates of returnis a meaningful measure of portfoliorisk under a reasonable set of assump-tions and also derived a formula forcomputing the variance of a portfolio.

His work gives emphasis on the impor-tance of the diversification of invest-ments to reduce the risk of a portfolioand also shows how to diversify suchrisk effectively. Though Markowitz’smodel is viewed as a classic attempt todevelop a comprehensive technique toincorporate first the concept of diver-sification of investments in a portfolio


Optimal Portfolio Construction by UsingSharpe’s Single Index Model

(An Empirical Study on Stocks of Some SelectedPublic Sector Enterprises in India)

Public Procurement – Case Study of the Indian Railways

45

Bodhibrata Nag*

Indian Railways is one of the world’s largest public sector organizations. Its network,traffic, organization and extent of vertical integration are gigantic. This paper undertakesa critical examination of its procurement process to understand the procedures andinstitutional mechanisms which have evolved over time for safeguarding institutional interests.The paper examines issues such as organizational structure, procurement organization,source selection methodology, procurement oversight and regulation and their impact on theeconomy, efficiency, transparency and accountability aspects of procurement. It is found thata unique combination of internal vigil, external oversight by independent bodies andorganizational characteristics contribute to robust procurement processes.

* Prof.Bodhibrata Nag, Operations Manage-ment Group, Indian Institute of Manage-ment, Kolkata.

Indian Railways (IR) is one of theworld’s largest public sector organiza-tions. Its network, traffic, organizationand extent of vertical integration aregigantic, with annual procurements tothe order of 18 billion dollars. IR hasevolved a distinctive set of processes andsafeguards, to ensure that procurementsare done in a fair manner. A uniquecombination of internal vigil and exter-nal oversight by independent bodiespromotes transparency and accountabi-lity of procurement. The oversightbodies, such as the CBI, CVC or C&AG,though grossly under-numbered exer-cise a deterrent effect through the ele-ment of uncertainty. Fair and equitabletreatment to all vendors and promo-tion of competition through open ten-ders ensure economy and value for

Keywords : Public Sector Organizations, Railways, Transparency, Public Procurement.

money. A dedicated procurement orga-nization in each zone ensures efficientand swift response to user needs. Parti-cipation of the user in the technicalevaluation of offers and tender evalua-tion process ensures quality and valuefor money. A decentralized procure-ment organization also ensures that itssensitivity to user quality requirements.While ensuring that there is strong over-sight mechanism in place, IR hasgranted over-riding powers to the topmanagement to apply its own judge-ment in meting punishments. Furtherthe functional segregation and cadreswith separate chains of command rightup to the board level, ensures that each


Public Procurement – Case Study ofthe Indian Railways

Economics of Barge-Based Inland Container Transportation :The Case of Southern Kerala

71

D.Rajasenan* & Rajeev, B.**

The study is aimed at working out the potentiality involved in the transportation ofsouth-based containers via waterways employing barges. It, by and large, focuses onthe economic viability of using standard feasibility indicators inter alia the perceptionof various stakeholders who will become the key players of the proposed venture.Taking into account the quantum of containerized cargo movements sandwichedbetween southern Kerala and Cochin, and the titanic cost incurred in the presenttransportation system, it is apparent that there is immense scope and potential forthe newly contemplated system. Survey data disclose a positive attitude towards theshift from road to barge-based transportation of cargo containers. The comparisonbetween the costs of various other modes of transportation of cargo containers alsostands in favour of such a shift, provided that the logistics involved are meticulouslymanaged. The potentiality and sustainability of barge-based transportation in differenttrip scenarios, based on Net Present Value and Benefit Cost Ratio shows that amongstthe four transportation scenarios, two scenarios between ICTT-Kollam and ICTT-Kottayam are the most feasible, taking into consideration the cost and revenue expectations.

* Prof.D.Rajasenan, Director, InternationalCentre for Economic Policy and Analysis(ICEPA) & Professor in Econometrics,Department of Applied Economics, CochinUniversity of Science and Technology(CUSAT), Kochi, Kerala, India.

** Rajeev, B., Research Assistant, Centre for theStudy of Social Exclusion and Inclusive Policy(CSSEIP), Cochin University of Science andTechnology (CUSAT), Kochi, Kerala, India.

The authors would like to acknowledge thefinancial support from the Kerala Shipping andInland Navigation Corporation Ltd., Cochin forentrusting a study concerning the central themeof the article.

Introduction

There has been a substantial increase inthe movement of export/import ofcargo to Cochin after the commission-ing of the Vallarpadam InternationalContainer Transshipment Terminal(ICTT). Cargo such as cashew, coir andcoir products, rubber and seafoodexported from the ICTT comes viaroadways from the southern districts ofKerala, viz., Kollam, Alappuzha andKottayam. The principal import itemsof raw cashews, news print, etc., are

Keywords : Containers, Cargo, Net Present Value, Benefit Cost Ratio.


Economics of Barge-Based InlandContainer Transportation : The

Case of Southern Kerala

Capital Structure, Leverage and Financing Decision: An Empirical Analysis of SelectedPublic Sector Oil and Gas Companies in India

89

Chitta Ranjan Sarkar* & Aniruddha Sarkar**

In the present article an endeavour has been made to throw some light on the business risk,financial risk, financial break-even point and total risk of selected public sector oil and gascompanies in India by means of assessing the degrees of associations between the selectedleverage ratios and return on equity capital (RoE) during the period from 2000-01 to2009-10. A comparative analysis has been undertaken to arrive at the decision whetherthe studying companies will have to change their proportion of external capital to totalcapital or not to withstand and sustain in the present competitive and changing environment.Statistical tool viz., correlation analysis, managerial tool viz., ratio analysis and statisticaltest viz., Student's 't' test have been employed to analyze and test the significance of theresults of the empirical study. The study concludes with some valid recommendations whichdeserve the attention of the management of concerned companies under study, oil and gassector in India and especially government.

* Dr.Chitta Ranjan Sarkar, Associate Professor,Department of Commerce, The Universityof Burdwan, Burdwan, West Bengal, India.

** Aniruddha Sarkar, Part-time Teacher inCommerce, Syamsundar College, Burdwan,West Bengal & Research Scholar, Departmentof Commerce, The University of Burdwan,Burdwan, West Bengal, India.

Introduction

Leverage not only tends to magnifyshareholders’ return and return oninvestment under favourable condi-tions, but also exposes them to risk. Useof more and more debt capital raises theriskiness of the firm’s earnings streambut it tends to provide a higher expectedrate of return to shareholders’. The con-cept ‘privatization’ leads to the employ-ment of more amounts of externalfunds in the capital structure of theIndian companies too. The use of debtfunds requires the payment of fixed

contractual commitments and as amatter of fact the concepts financial riskand financial break-even point havecome into the financial decision-mak-ing process. The emphasis of the presentstudy is to measure and analyze theoperating risk, financial risk, financial

Keywords : Capital Structure, Leverage, DOL, DFL, Financial Break-even Point, DTL& ROE.


Capital Structure, Leverage and FinancingDecision : An Empirical Analysis of

Selected Public Sector Oil andGas Companies in India


104

Arunachal Khosla*

This study analyses the difference in perception of organizational culture in Indian bankingindustry across public and private sector banks. The study uses descriptive and t-testanalysis to identify the difference in perception of organizational culture across publicand private sector banks in India. The research paper studies the various dimensions oforganizational culture to identify the difference in perception of organizational cultureamong private and public sector bank employees. It is worth noting that in twenty twoout of thirty two factors, the employees of public sector banks perceived organisationalculture differently from private sector banks.

* Dr.Arunachal Khosla, Assistant Professor,University Institute of Applied ManagementSciences, Panjab University, Chandigarh.

Introduction

Since 1991, India has been engaged inbanking sector reforms aimed at in-creasing the profitability and efficiencyof the then 27 Public Sector Banks(PSBs) that controlled about 90 percent of all deposits, assets and credit.The reforms were initiated in the middleof a ‘current account’ crisis that occu-rred in the early 1991. The crisis wascaused by poor macroeconomic perfor-mance, characterized by a public defi-cit of 10 per cent of Gross DomesticProduct (GDP), a current account defi-cit of 3 per cent of GDP, an inflationrate of 10 per cent and growing domes-tic and foreign debt and was triggeredby a temporary oil price boom follow-ing the Iraqi invasion of Kuwait in

Keywords : Organizational Culture, Organizational Performance, Private and PublicSector Banks.

1990. Prior to the reforms, India’sfinancial sector had long been charac-terized as highly regulated and finan-cially repressed. The prevalence ofreserve requirements, interest rate con-trols and allocation of financial resourcesto priority sectors increased the degreeof financial repression and adverselyaffected the country’s financial resourcemobilization and allocation.

In the period prior to reforms (1969-1991), savings were successfully mobi-lized because relatively low inflationkept negative real interest rates at a mildlevel and because the number of bran-ches was encouraged to expand rapidly.


A Comparative Study of Differences inOrganisational Culture of Public

and Private Sector Banks

Requirements Analysis for Disaster Recovery Plan atIntegral Coach Factory, Chennai

117

Sasirekha V*

There are many common risks involved in all business environments that can lead toadverse effects and hinder company growth. These risks can come from external source suchas natural disaster including hurricanes, earthquakes, floods, fire, etc., as well as internalrisks including hardware failure, human error or even sabotage. It is essential for a companyto create and follow business policies to secure the integrity of information as well as variouscompany assets crucial to an organizations' functionality. A data Disaster Recovery Plan(DRP) is an integral part of the business policy and ensures the integrity and functionalityof stored data in case of a disaster. This paper aims to analyze and design a DRP for theorganization under study. Primary data was collected through a structured interview amongthe employees of the organization. Failure Mode Effects Analysis was done to find outfailure modes and risk priority. This research presents the feasibility analysis of a new dataDRP for the organization to continue even in the case of occurrence of a disaster.

* Dr.Sasirekha V, Professor, Sri Sai Ram Insti-tute of Management Studies, Sri Sai RamEngineering College, Sai Leo Nagar, Chennai.

Introduction

As Information Technology (IT) sys-tems have become increasingly criticalto the smooth operation of a company,the importance of ensuring the contin-ued operation of those systems or therapid recovery of the systems, hasincreased. It is estimated that most largecompanies spend between 2 per centand 4 per cent of their IT budget onDisaster Recovery Planning (DRP),with the aim of avoiding larger lossesin the event that the business cannotcontinue to function due to loss of ITinfrastructure and data. Of companiesthat had a major loss of business data,

Keywords : Disaster Recovery Plan; ICF (Integral Coach Factory); FMEA.

43 per cent never reopen, 51 per centclose within two years, and only 6 percent will survive long-term. As a result,preparation for continuation or reco-very of systems needs to be taken veryseriously.

Disaster recovery is defined as the setof processes that go into the “recove-ring and continuation of technology-related infrastructure that is critical tothe basic functioning of an organizationin the event of disasters that are natural


Requirements Analysis for DisasterRecovery Plan at Integral

Coach Factory, Chennai


128

Shree Raman*

India still lives with lanterns though electricity generation started at par with New Yorkand London in 1882. Load shedding is the rule of the day despite the government's recentmandate of power to all by 2012. Power holidays are supporting slow industrial economicgrowth. Free power to farmers is a distant dream battling between government and politics.Crippling irrigation system is dwindling down agricultural yields. Electrifying fewmetropolitan cities and leaving behind many villages deprived of basic infrastructure forgrowth and development speaks of disparity in electricity services. Uncertain National policieshave failed to implement the expected reforms. Independent power providers fear investmentand are unwilling to take risk in electrifying rural India. Rising population is underminingthe minor attempts undertaken to transform the electricity services in underdeveloped regionsof the country. People below the poverty line are cursing their destiny. When will lantern toelectric lamp become a reality? Solar lamps are replacing kerosene lanterns. Rural India isdwelling in the dusk.

* Shree Raman, Research Scholar, Department ofCommerce and Management Studies, AndhraUniversity, Visakhapatnam.

Electricity in India

Today, at the dawn of 21st centuryIndia’s deregulating power sector ischaracterized with uncertainty of regu-latory reforms, disparity in electricityservices, widening gaps in powersupply chain, de-licensed power genera-tion, unbundling of SEBs, underdeve-loped power market, infancy in powertrading, emerging power and energymix, fuel supply insecurity, loadshedding, power holidays and black-outs, immature energy conservation,unethical wastage of electrical energy,government’s unsupported visions andunconducive competition in the sector.

The power sector over the 100 yearssince under British rule to the recentlyenacted historic Electricity Act, (2003)has experienced and journeyed throughdecentralization, nationalization,privatization, liberalization, deregula-tion and corporatization of electricityservices in India. Who will switch onIndia‘s power future? How can Indiabalance power supply and demand?Can the Government of India do jus-tice to the power utilities and electric-ity consumers? Is the role of regulation

Keywords : Electricity, Load Shedding, Agricultural Yields, Population.


An Unfulfilled Dream Lanternto Electric Lamp

The Journal of Institute of Public Enterprise

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