Professor Sarmistha Pal
Chair in Financial Economics
PhD(LSE)
Biography
Biography
Sarmistha Pal is a Professor of Financial Economics at the University of Surrey, Guildford (UK). Previously, she had taught Economics at the University of Wales at Aberystwyth and Cardiff and subsequently at the Brunel University in London.
She is an applied economist working on issues pertaining to both economics and finance. Her primary research interests relate to analysing the impact of law, institutions and public policy on various economic agents (individual/household, firms/banks, community etc.) using large data-sets and natural experimental framework for identification. Her current and recent research in Finance explores the role of networking on firm financing in corrupt host environment, role of various corporate governance reforms including transparency and disclosure laws on firm financing, firm performance and industrial accidents, effects of land reforms on corporate investment. Her current research in Economics includes work on public and private schools, regulation and moonlighting of dual health practitioners, women friendly hospital environment and child mortality, effects of social and religious norms on public good provision, effects of old age pensions on elderly co-residency arrangements, effects of fiscal decentralisation on political transition and local development. Her research has been funded by the Economic and Social Research Council (UK), Leverhulme Trust, World Bank, European Bank for Reconstruction and Development, International Finance Corporation and the University Global Partnership Network (UGPN).
She is an IZA (University of Bonn, Germany) Research Fellow and also an external research affiliate at CSAE, University of Oxford.
She serves on the editorial board of the Journal of Development Studies (ABS 3*).
She is an external examiner for the UG Microeconomics modules for the Economics Department at the City University London.
She is a member of ESRC peer review college and as such regularly referees grant and fellowship applications submitted to ESRC. She has also reviewed applications submitted to Nuffield Foundation, Leverhulme Trust and National Science Foundation (US).
She regularly does research consultancy for various national (Home Office, Department of Foreign and International Development (DFID), Department of Business, Innovations and Skills, UK) and international (World Institute of Development Economics Research (WIDER), World Bank (WB), UNESCO and the International Finance Corporation (IFC)) organisations. Currently she is acting as a consultant for a DFID funded project based in the Cambridge University.
Research interests
Public Economics; Public Finance; Emerging Markets Finance; Institutions and Political Economy.
Recent Research Grants
UGPN grant (US$20000) 1st August 2016-31 July 2017: Whither youth crime? Impact assessment of the recent public policy interventions in Brazil - Principal Applicant
ESRC small grant RES-000-22-0200 (£43804.00), October 2003- September 2005: 'CORPORATE CAPITAL STRUCTURE IN EAST ASIA BEFORE AND AFTER THE CRISIS'- Principal applicant.
ESRC standard grant RES-062-23-0986 (April 2008- March 2010): "FDI, Ownership and Corporate Governance in Europe" (joint with Nigel Driffield, Aston and Tomasz Mickiewicz, UCL)
Leverhulme Research Fellowship: September 2008-August 2009. "Rise of Private Schools and Universal Education"ESRC small grant RES-000-22-0200, October 2003- September 2005: "Corporate Capital Structure in East Asia Before and After the Crisis"
Brunel SSS research grant June 2010: 'Multiculturalism, Minority Representation and Public Policy: Evidence from Local Governments in the UK' (joint with Justin Fisher (Politics) & Sugata Ghosh (E&F))
Research collaborations
I currently have collaborations with researchers at the City University London (UK), University of Durham (UK), University of Kent (UK), Universidad de Buenos Aires (Argentina), Paris School of Economics (France), Universidad Pablo de Olavide (Spain), Monash University (Australia), University of New South Wales (Australia), Indian Statistical Institute Delhi, Kolkata (India), University of Sao Paulo (Brazil) and Stevens Institute of Technology (USA) and the World Bank (USA).
Teaching
MSc Quantitative Method (MANM280)
Departmental duties
Head of Recruitment (Finance)
Affiliations
Research Fellow, IZA, University of Bonn, Germany;External research affiliate, CSAE, University of Oxford
Member American Economic Association
Member Royal Economic Society
Organisation of conferences/symposia
I organised ESRC funded (grant RES-000-22-0200) workshop on "Corporate Governance, Corporate Restructuring and Corporate Finance in Transition Economies" on 9-10 September 2005, Brunel University.
I organised Leverhulme Trust funded symposium on "School Privatisation and Universal Education in Asia" for the Oxford Conference on Education and Development, September 2009.
I organised ESRC funded special session on Globalisation and FDI at the Royal Economic Society Annual Conference March 2010.
I organised a symyposium on Institutions and Globalisation for the Association of the the Comparative Economic Studies as part of the ASSA meeting in Chicago, January 2012.
I organised the Surrey-IFABS 2016 conference on 'Firm Value Maximisation and Corporate Social Responsibility: Implications for Corporate Finance and Corporate Governance' on 15-16 September 2016
I organised the Surrey-UGPN conference on 'Youth Crime and Public Policy' between 6-7 July 2017
Policy Articles/Media Briefings
'Whither female disadvantage? An analysis of private school enrolment in India' October 2016 (forthcoming) Ideas for India Column, International Growth Centre LSE & Oxford.
Why demonetisation?Ideas for India Perspective December 1 2016
Why demonetisation?Business Standard December 1 2016
Dear PM Modi, Save Informal Sector from a Post Note Ban Recession (jointly with Kaushik Bhattacharya, Siddhartha Mitra and Bibhas Saha)The Quint, February 10 2017
Reviving the informal sector from the throes of demonetisation (jointly with Kaushik Bhattacharya, Siddhartha Mitra and Bibhas Saha)Ideas for India Perspective 13 February 2017
Land acquisition and corporate investment: Legacy of historical land ceiling legislations? (jointly with Tiago Pinheiro and Zoya Saher)Ideas for India Column April 23 2017
Why land ceilings hurt corporate investment? (jointly with Tiago Pinheiro and Zoya Saher)Business Standard April 23 2017
India's Cashless Society Participation in BBC World Service programme
Demonetisation and GST: Reckless Decisions that Cost the Economy? The Quint 28 November 2017
My research on Private schools in developing countries funded by the Leverhulme Research Fellowship 2008-09 has received a lot of attention since the publication of the DFID Rigorous Review and a follow-up article on the Guardian 16 March 2015. Find out more.
My publications
Publications
Maitra P, Pal S, Sharma A (2016) Absence of Altruism? Female Disadvantage in Private School Enrolment in India, World Development 85 pp. 105-125 Elsevier
Women make up one-half of the world?s population, though two-thirds of the world?s non-literate adults are women, which highlight the pervasive denial of the basic human right to education experienced by women across the globe. While there is a sizeable literature on gender discrimination in girls? schooling, we know very little about girls? access to private schooling, despite its rapid growth around the world in recent years. Using two nationally representative datasets from household surveys conducted in India in 2005 and 2012, our paper aims to bridge this gap by examining the role of gender in private school choice. We argue that the gender of the child is potentially endogenous in India because parents continue to have children until they have a son. To redress this potential endogeneity, we exploit the variation in private school choice among 7-18 year olds born to the same parents within the same household in an attempt to minimize both child-invariant and child-varying household-level omitted variable bias. We then explore the nature of female (dis)advantage across different types of households, communities and years with a view to assess the role of parental preferences in this respect and its change, if any. The analysis thus allows us to provide new evidence for the causal effect of gender on private school choice in India. Significant female disadvantage exists in both survey years, though the size of this disadvantage varies across sub-samples and years. Female disadvantage is significantly higher among younger (relative to eldest) girls and also in northern and northwestern (relative to western) regions, but it is lower among girls from poor (relative to rich) households, Christian (relative to Hindu high caste) households, and those with more educated mothers. Our results are robust, irrespective of whether or not we restrict the sample to those born to a household head. We infer that the observed within-household variations in female disadvantage across subsamples reflect variations in non-altruistic parental preferences linked to deeply held cultural norms (for example, sons acting as old-age security and the exogamy of girls), access to schools and other public goods, and also job opportunities and returns to schooling for girls, thus posing considerable challenges in the attempt to secure ?education for all.?
Pal S (2002) Segmentation of rural labour contracts: Some further evidence, Bulletin of Economic Research 54 (2) pp. 151-180
The paper offers an explanation of labour tying commonly observed in seasonally agricultural economies. Employers may either hire regular labourers in the slack season to satisfy all or most of the labour demand in the high season but have underutilised labour in the low-demand season or rely on casual labourers only. Thus farmers hiring regular labour may also hire some casual labour as and when needed to minimise the hoarding costs of regular labour. Secondly, daily regular wages are usually lower than daily casual wages, but regular labourers usually get some wage-advance as well. Thus asset-poor workers have incentives to choose regular labour with interest-free wage advance because they face high marginal costs of credit in the segmented credit markets. The optimum hoarding costs decrease with increase in farm size, but increase with increase in spot market wages. However with improved availability of alternative employment opportunities and/or cheaper credit facilities to the asset-poor labourers, the supply of regular labour is likely to decline. Empirical evidence from the ICRISAT villages in south India seems to be consistent with the primary propositions of the model.
Pal S, Berglof E (2007) Symposium on Corporate Governance, The Economics of Transition 15 (3) pp. 429-432
Pal S (2002) Household sectoral choice and effective demand for rural credit in India, Applied Economics 34 (14) pp. 1743-1755
An analysis of the ICRISAT data from three Indian villages raises concern about the extent of rationing mechanism inhibiting the spread of formal credit in rural India where a significant proportion of households do not have any outstanding loan or borrow from the informal sector only. A limited-dependent econometric analysis of the factors jointly determining household sectoral choice and effective demand for informal loan conditional on whether a formal loan is available suggests that compared to formal loan easy and adequate access and prompt recovery are significant determinants of the popularity and viability of informal rural credit among sample households; also some households substitute labour income to ease the extent of credit. Thus, rationing of the formal credit is not the only factor inhibiting the spread of formal credit in the study villages.
Pal S (1999) An Analysis of Childhood Malnutrition in Rural India: Role of Gender, Income and Other Household Characteristics, World Development 27 (7) pp. 1151-1171 Elsevier
There are controversies regarding the role of individual and household characteristics in childhood nutritional status measured by anthropometric indicators. Using a nutrition index based on weight-for-age of children in rural India, the paper re-examines this issue. Ordered probit estimates of nutritional status suggest female literacy improves the nutritional status of boys at the cost of girls while higher per capita current income improves that of both boys and girls, though the impact is higher for boys; however, effect of income is not robust when we use instruments of longer-run income. But more income and literacy give more ways to discriminate between boys and girls.
Maitra P, Pal S (2008) Birth spacing, fertility selection and child survival: Analysis using a correlated hazard model, Journal of Health Economics 27 (3) pp. 690-705
Pal S (2004) Child schooling in Peru: Evidence from a sequential analysis of school progression, Journal of Population Economics 17 (4) pp. 657-680
Primary enrolment rates are very high in Peru, but so are the failure and drop-out rates. Thus an understanding of the nature of child schooling should consider school progression from primary to secondary and higher levels, taking account of the conditional sequence with the previous level and self-selection into the next higher level of schooling. Using a unique correlated sequential probit model with unobserved heterogeneity the present paper does so and obtains richer results, argued to be better than the standard static estimates. It is shown that the same set of individual/parental/household characteristics may affect different levels of schooling differently.
Pal S (2007) Casual and regular contracts: Workers? self?selection in the rural labour markets in India, Journal of Development Studies 33 (1) pp. 99-116 Taylor & Francis
The article examines workers? choice between casual and regular contracts. It departs from existing theories in that in addition to wage considerations it highlights the significance of time and credit constraints. Results obtained from the ICRISAT villages in India suggest that risk?averse landless labourers ought to prefer casual to regular contracts because earnings from casual contracts are higher. However, this argument gets strongly modified once we consider that a large part of regular wages are received in advance and that the comparative attractiveness of regular contracts depends crucially on whether labourers have access to credit and other jobs.
Makepeace G, Pal S (2008) Understanding the effects of siblings on child mortality: Evidence from India, Journal of Population Economics 21 (4) pp. 877-902
Pal S (2004) How much of the gender difference in child school enrolment can be explained? Evidence from rural India, Bulletin of Economic Research 56 (2) pp. 133-158
There are significant gender differences in child schooling in the Indian states though very few studies explain this gender difference. Unlike most existing studies we take account of the implicit and explicit opportunity costs of schooling and use a bivariate probit model to jointly determine a child's participation in school and market jobs. Results obtained from the World Institute of Development Economics Research (WIDER) villages in West Bengal suggest that indicators of household resources, parental preferences, returns to and opportunity costs of domestic work significantly affect child school enrolment. While household resources have similar effects on enrolment of boys and girls, other arguments tend to explain a part of the observed gender difference. Even after taking account of all possible arguments, there remains a large variation in gender differences in child schooling that cannot be explained by differences in male and female characteristics in our sample. © Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research 2004.
Pal S, Makepeace G (2003) Current contraceptive use in India: Has the role of women's education been overemphasised?, European Journal of Development Research 15 (1) pp. 149-169
Using the recent Indian National Family Health Survey (NFHS) data, this article analyses the factors determining the current contraceptive use in rural and urban West Bengal in eastern India. A bivariate probit model with selection is used to determine the likelihood of not being sterilised and that of currently using some traditional or modern reversible method of contraception among non-sterilised women. Our results suggest that male and female sterilisation is a popular method among the poorer couples with little assets, poor education and more living children. More literate women are, however, more likely to use various reversible methods of contraception though the effect of husband's education remains insignificant. Relative to women's education or various household assets, the effect of belonging to an upper caste household is more pronounced on the current use of contraception, especially among rural women. Simulations of the effect of eliminating illiteracy suggest that the quantititive significance of education is small despite its robust statistical significance. Thus there is limited effect of household assets and women's education on current use of contraception in our sample.
Pal S, Driffield N, Mahambare V (2007) How does ownership structure
affect capital structure and
firm value?, The Economics of Transition
affect capital structure and
firm value?, The Economics of Transition
The present paper examines the effects of ownership structures on capital structure and firm
valuation. It argues that the effects of separation of control from cash flow rights on capital structure
and firm value also depend on the separation of control from management as well as on legal
rules and enforcement defining investors? protection. We obtain firm-level panel data (three stage
least squares, 3SLS) estimates from four of the East Asian countries worst affected by the last crisis.
There is evidence that the general wisdom that higher control than cash flow rights may lower
firm value may be reversed among owner-managed family firms in the sample countries.
valuation. It argues that the effects of separation of control from cash flow rights on capital structure
and firm value also depend on the separation of control from management as well as on legal
rules and enforcement defining investors? protection. We obtain firm-level panel data (three stage
least squares, 3SLS) estimates from four of the East Asian countries worst affected by the last crisis.
There is evidence that the general wisdom that higher control than cash flow rights may lower
firm value may be reversed among owner-managed family firms in the sample countries.
Owolabi O, Pal S (2013) Does business networking boost firms' external financing opportunities? Evidence from Central and Eastern Europe, Applied Financial Economics 23 (5) pp. 415-432
This article argues that networked firms are likely to have an advantage in securing bank finance in countries with weak legal and judicial institutions since it helps banks and other financial institutions to minimize the underlying agency costs of lending. An analysis of recent Business Environment and Enterprise Performance Survey (BEEPS) data from 15 Central and Eastern European (CEE) countries lends some support to this hypothesis. Even after controlling for other factors, firms affiliated to Business Associations (BA) are more likely to secure bank finance. Further, the importance of business networking is particularly evident among firms who borrow from private domestic banks, as these new banks attempt to minimize costs of adverse selection. There is also some confirmation that the significance of networking disappears with improvement in institutional quality. © 2013 Copyright Taylor and Francis Group, LLC.
Pal S (1999) Task-Based Segmentation of Rural Labour Contracts: Theory and Evidence, Bulletin of Economic Research 51 (1) pp. 67-94 Wiley
The paper examines the theoretical and empirical validity of task-based segmentation of rural labour contracts in seasonal agriculture. Regular labour is hired to perform tasks that are difficult to supervise for which casual labour is not incentive-compatible, and a regular wage above the reservation wage ensures no shirking in these tasks. It is argued that there is a hoarding cost of regular labour which is the cost when productivity is low during the slack season. This implies that minimization of supervision costs necessitates the employment of regular labour in certain tasks, but enhances hoarding cost. Results from the ICRISAT villages in India suggests that daily regular wages are lower than daily casual wages, adjusted by the probability of unemployment. Estimates of a tobit selection model suggest that (a) task characteristics are not significant even among the farms hiring regular labour, (b) larger employment-intensive farms tend to hire more regular labour irrespective of the choice of crop, and (c) there is a significant substitutability between regular and family labour. These results seem to question the very basis of task-based segmentation and strengthen the hoarding cost argument: farms hiring regular labour use it indiscriminately in both non-monitorable and monitorable tasks and, if possible, they may substitute family labour for regular labour with a view to minimizing hoarding cost.
Pal S, Palacios R (2011) Understanding poverty among the elderly in India: Implications for Social Pension Policy, Journal of Development Studies 47 (7) pp. 1017-1037 Taylor & Francis
Since 1995, cash transfers to the poor elderly or ?social pensions? have been one of the most important anti-poverty programmes in India. On the assumption that elderly poverty rates are higher than the general population, the minimum eligibility condition is set for 60 + in most states. Our analysis using 52nd and 60th round household-level National Sample Survey data, however, suggests that households with targeted elderly members 60 + do not necessarily have higher poverty rates than non-elderly households. Further analysis suggests that there is an expenditure-mortality link so that the poor tend to die younger and are therefore under-represented among those aged 60 + in most states.
Pal S, Driffield N (2010) Evolution of capital structure in east
Asia?corporate inertia or endeavours?, Journal of Royal Statistical Society Series A 173 Royal Statistical Society
Asia?corporate inertia or endeavours?, Journal of Royal Statistical Society Series A 173 Royal Statistical Society
The paper examines the capital structure adjustment dynamics of listed non-financial
corporations in seven east Asian countries before, during and after the crisis of 1997?1998. Our
methodology allows for speeds of adjustment to vary, not only among firms, but also over time,
distinguishing between cases of sudden and smooth adjustment.Whereas, compared with firms
in the least affected countries, average leverages were much higher, generalized method-ofmoments
analysis of the Worldscope panel data suggests that average speeds of adjustment
were lower in the worst affected countries. This holds also for the severely financially distressed
firms in some worst affected countries, though the trend reversed in the post-crisis period.
These findings have important implications for the regulatory environment as well as access to
market finance.
corporations in seven east Asian countries before, during and after the crisis of 1997?1998. Our
methodology allows for speeds of adjustment to vary, not only among firms, but also over time,
distinguishing between cases of sudden and smooth adjustment.Whereas, compared with firms
in the least affected countries, average leverages were much higher, generalized method-ofmoments
analysis of the Worldscope panel data suggests that average speeds of adjustment
were lower in the worst affected countries. This holds also for the severely financially distressed
firms in some worst affected countries, though the trend reversed in the post-crisis period.
These findings have important implications for the regulatory environment as well as access to
market finance.
Ghosh S, Pal S (2004) The effect of inequality on growth: Theory and evidence from the Indian states, Review of Development Economics 8 (1) pp. 164-177
The paper examines the effect of inequality on growth among the subnational states in India. Theoretically, growth of the regional economy is driven by productive public investment in the provision of health and education services financed by a linear output tax, and the optimum tax rate is determined by the median voter. In contrast to existing results, the authors obtain an ambiguous relationship between initial inequality and subsequent economic growth. Analysis of the Indian state-level data suggests that rural inequality influences growth of total output more than urban inequality, and does so negatively. The indicator of intersectoral inequality is more important in explaining sectoral output growth.
Bhaumik S, Pal S, Owolabi O (2016) Information Costs, Institutional Distance, and Entry Mode Choice of Financial Intermediaries: Evidence from Central and Eastern Europe,
In sectors such as financial intermediation, a multinational bank?s (MNB) ability to compete in a host country location depends on its access to information that are embedded in the relationships between local banks and their clients. Institutional distance between home and host countries of MNBs increases the verification costs of the quality of these embedded relationships (and hence the associated assets), and also makes it difficult for a MNB to balance its legitimacy between the two contexts. In this paper we develop hypotheses about the implications of information costs and institutional distance on entry mode choice of MNBs; the hypotheses find support in our empirical analysis.
Pal S, Palacios R (2006) Old Age Poverty in the Indian States: What the Household Data Can Say?, Pension Reform Primer working paper series World Bank, Washington DC.
In the absence of any official measures of old age poverty, this paper uses National Sample Survey household-level data to investigate the extent and nature of living standards and incidence of poverty among elderly in sixteen major states in India. We construct both individual and household-level poverty indices for the elderly and examine the sensitivity of these poverty indices to different equivalence scales and size economies in consumption. In general, these adjusted estimates indicate that households with elderly members have lower incidence of poverty in all of the states, albeit to different degrees. Part of the explanation appears to be related to differences in dependency ratios in households with and without elderly, where a significant percentage of elderly, especially men, continue to work well past the age of sixty. The favourable effect of the presence of elderly on household living standards and incidence of poverty is however weakened once we control for dependency ratio, among other things, with significant inter-state variation noted in our sample.
McKay A, Pal S (2004) Relationships between household consumption and inequality in the Indian States, Journal of Development Studies 40 (5) pp. 65-90
Current evidence on the relationships between growth and inequality is predominantly based on cross-country data sets or panel data sets covering a small number of time periods. But these relationships, being fundamentally dynamic in nature, need to be considered over a much longer time horizon. Available state level results from the National Sample Surveys in India provide such an opportunity. This article uses this unique data set to examine the interrelationships between average consumption and inequality within states, and test for causality. Distributional patterns of growth vary, but there is strong evidence in many instances of a strong negative effect of initial inequality on subsequent growth. © 2004 Taylor and Francis Ltd.
Makepeace G, Pal S (2006) Effects of birth interval on child mortality: evidence from a sequential analysis., World Health Popul 8 (2) pp. 69-82
Unlike most existing studies, this paper examines the effects of birth interval on child mortality in a sequential framework. Birth spacing is captured by the length of time since the birth of the last child and the time varying covariates identifying the arrival of a younger sibling during any month after the birth of the present child. We use an instrumental variable method to reduce the endogeneity bias and compare the hazard estimates of child survival with and without instruments for birth spacing. These instrumented sequential results not only reaffirm the static inverse relationship, but also emphasize that the inverse relationship between birth interval and child mortality crucially depends on both the gender and the birth order of the child.
Pal S, Kynch J (2000) Determinants of occupational change and mobility in rural India, Applied Economics 32 (12) pp. 1559-1573
With a view to redress the dearth of economic analysis on occupational dynamics in rural household economies, this study examines the nature and characteristics of occupational change and mobility in rural India. Using the unique WIDER data-set from six villages in West Bengal, India the factors causing a change of primary occupation among those tried to change occupation over a twelve-month recall period has been analysed. Bivariate probit estimates jointly determining the probability of trying to change occupation and having been successful suggest that success in changing occupation depends crucially on socially constructed 'status' - being older, male, from larger farming families or having higher schooling experience. They also exemplify the effects of regional diversity, levels of prosperity and different patterns of employment between agricultural and non-agricultural activities.
McNabb R, Pal S, Sloane P (2002) Gender differences in educational attainment: The case of university students in England and Wales, Economica 69 (275) pp. 481-503 Wiley
This paper examines the determinants of gender differences in educational attainment using data for all university graduates. We find that, although women students perform better on average than their male counterparts, they are significantly less likely to obtain a first class degree. There is no evidence that this is because of differences in the types of subject male and female students study or in the institutions they attend, nor does it reflect differences in personal attributes, such as academic ability. Rather, it is differences in the way these factors affect academic achievement that give rise to gender differences in performance.
Pal S, Palacios R (2011) Understanding poverty among the elderly in India: Implications for social pension policy, Journal of Development Studies 47 (7) pp. 1017-1037
Kynch J, Pal S (2000) The Dynamics of Poverty: Occupational Mobility in Rural India, In: Perdikis N (eds.), Indian Economy: Contemporary Issues Ashgate
Pal S (2000) Economic reform and household welfare in rural China: Evidence from household survey data, Journal of International Development 12 (2) pp. 187-206
Existing studies highlight the uncertainty about changes in living standards in China's transition to market economy. Using household data from Jiangsu and Sichuan provinces, we examine the significance of demographic characteristics on rural household welfare which has generally been overlooked in the existing literature. Three sets of results are reported here: (i) estimates of total land allocated per household suggests that household marginal share of land is higher for a resident adult compared to a child or an old and lower for non-resident members or members engaged in non-farm activities. (ii) Regular adjustment of land to changing demographic composition generates a lack of security of tenure in land as well as an impetus for the growth of rural non-farm activities as reflected in the estimates of household per capita income and expenditure: an additional resident or non-resident adult, engaged in non-farm activities enhances rural household welfare while an additional child or old member lowers it, which also reflects the deterioration in the provision of social services. (iii) Probit analysis of poverty status based on poverty-level income suggests that the poor are likely to be those households with more children or old members and also those primarily depending on farm activities. In a situation of changing demographic patterns and a changing balance between rural farm and non-farm employment prospects, there is a need to identify the poor and the vulnerable adequately so that the latter do not have to bear the brunt of the reform. Copyright (C) 2000 John Wiley and Sons, Ltd.
Pal S, Ghosh S (2011) Poverty, Elite Heterogeneity, And The Allocation Of Public Spending: Panel Evidence From The Indian States, Review of Income and Wealth
Driffield N, Pal S (2001) The East Asian crisis and financing corporate investment: Is there a cause for concern?, Journal of Asian Economics 12 (4) pp. 507-527
In view of limited empirical evidence concerning the microeconomic aspects of corporate financial problems in the East Asian countries in the 1990s, this paper analyses the financing pattern of corporate investment in Indonesia, Korea, Malaysia, and Thailand. The analysis is based on an unbalanced panel of listed firms during the period 1989-1997. By using firm size, retention practices, and leverage as three different indicators of financial constraint on firm investment, we have examined the role of various internal and external financing variables on corporate investment in the sample countries. Results indicate that a large number of sample firms depend on free cash flow, especially in Indonesia; there was also a steady increase in debt-equity ratio in all countries. There were signs of agency costs in the use of cash flow in Korea and Malaysia and also in the use of debt financing in Malaysia and Thailand. There was also sign of over-investment among the Thai firms during 1994-1997 though it appears very little if at all was done to redress it in time. © 2001 Elsevier Science Inc. All rights reserved.
Pal S (2010) Public infrastructure, location of private schools and primary school attainment in an emerging economy, Economics of Education Review 29 (5) pp. 783-794
Coricelli F, Driffield N, Pal S, Roland I (2012) When does leverage hurt productivity growth? A firm-level analysis, JOURNAL OF INTERNATIONAL MONEY AND FINANCE 31 (6) pp. 1674-1694 ELSEVIER SCI LTD
Ghosh S, Mourmouras IA, Pal S, Paya I (2003) On public investment, the real exchange rate and growth: Some empirical evidence from the UK and the USA, MANCHESTER SCHOOL 71 (3) pp. 242-264 BLACKWELL PUBL LTD
Bhaumik S, Driffield N, Pal S (2010) Does Ownership Structure of Emerging Market Firms Affect their Outward FDI?
The Case of Indian Automotive and Pharmaceutical Sectors, Journal of International Business Studies 41 (3) pp. 437-450 Palgrave Macmillan
The Case of Indian Automotive and Pharmaceutical Sectors, Journal of International Business Studies 41 (3) pp. 437-450 Palgrave Macmillan
This article examines the impact of ownership structures of emerging market firms, which are
shaped by local institutions, on the decision of these firms to undertake outward FDI. Our results
suggest that family firms and firms with concentrated ownerships, both ubiquitous in emerging
markets, are less likely to invest overseas, and that strategic equity holding by foreign investors
facilitates outward FDI. We conclude that organisational forms such as family firms, that are
optimal outcomes of institutions prevailing in emerging markets, may be sub-optimal in a
changing business environment in which outward FDI is necessary for access to resources and
markets.
shaped by local institutions, on the decision of these firms to undertake outward FDI. Our results
suggest that family firms and firms with concentrated ownerships, both ubiquitous in emerging
markets, are less likely to invest overseas, and that strategic equity holding by foreign investors
facilitates outward FDI. We conclude that organisational forms such as family firms, that are
optimal outcomes of institutions prevailing in emerging markets, may be sub-optimal in a
changing business environment in which outward FDI is necessary for access to resources and
markets.
Kambhampati US, Pal S (2001) Role of parental literacy in explaining gender difference: Evidence from child schooling in India, European Journal of Development Research 13 (2) pp. 97-119
Using the WIDER data-set from rural West Bengal, this article examines gender differences in child schooling, using indicators of school enrolment and attainment at the primary level. Among various factors studied, there is only weak evidence that characteristics of the older siblings and household resource constraint can explain this observed gender difference. There is, however, significant evidence that paternal and maternal education explain gender differences in both school enrolment and attainment: while father's education has a significant impact on both boy's and girl's education at the primary level, mother's literacy has greater impact on the chances of daughters being educated than sons. In other words, when mothers have bargaining power, in this case via education, they are likely to increase collective household welfare rather than to perpetuate discriminatory practices.
Driffield N, Pal S (2006) Do external funds yield lower returns? Recent evidence from East Asian economies, Journal of Asian Economics 17 (1) pp. 171-188
One of the central explanations of the recent Asian Crisis has been the problem of moral hazard as the source of over-investment and excessive external borrowing. There is however rather limited firm-level empirical evidence to characterise inefficient use of internal and external finances. Using a large firm-level panel data-set from four badly affected Asian countries, this paper compares the rates of return to various internal and external funds among firms with low and high debt financing (relative to equity) among financially constrained and other firms. Selectivity-corrected estimates obtained from random effects panel data model do suggest evidence of significantly lower rates of return to long-term debt, even among firms relying more on debt relative to equity in our sample. There is also evidence that average effective interest rates often significantly exceeded the average returns to long-term debt in the sample countries in the pre-crisis period. © 2006 Elsevier Inc. All rights reserved.
Pal S (1998) A Limited-dependent Analysis of the Choice of Regular Labour Contract in Seasonal Agriculture, Applied Economics 30 (10) pp. 1347-1359 Taylor & Francis
The paper examines both theoretically and empirically the factors determining the demand for regular labour in seasonal agriculture. In an implicit contract framework it is argued that there are ?hoarding costs? of regular labour in the slack period when there is not much work to be done. Consequently, the number of regular labour employed is constrained by the hoarding cost where larger employment-intensive farms tend to hire more regular labour. Evidence from the ICRISAT villages in India, too, show that though the marginal costs of regular labour are zero, there are significant hoarding costs of regular labour among small farms so that larger farmers are the major demanders of regular labour. Estimates of the double-hurdle model jointly determining the probability of hiring regular labour and demand for regular labour-hours (if a regular labour is hired) are shown to be an improvement over univariate tobit estimates of the demand for regular labour-hours only.
Pal S (1997) An Analysis of Declining Incidence of Regular Labour Contracts in Rural India, Journal of Development Studies 34 (2) pp. 133-155 Taylor & Francis
Evidence obtained from the ICRISAT villages in India suggests that the decline of regular contracts has been accompanied by the growth in real wages and casualisation of the rural labour force. In view of this evidence, the article examines the causes of the declining incidence of regular contracts in rural India. We argue that this has been caused by the leftward shift in the regular labour supply curve due to improved employment and credit opportunities and not an upward movement of the labour demand curve as manifested by the increase in real wages over the years.
Pal Sarmistha, Wahhaj Z (2017) Fiscal Decentralisation, Local Institutions and Public Goods Provision: Evidence from Indonesia, Journal of Comparative Economics 45 (2) pp. 383-409 Elsevier
Using data from the Indonesian Family Life Surveys, we study the impact of fiscal decentralisation in Indonesia on local public spending across communities characterised by different types of informal and formal institutions. Our results provide new evidence that fiscal decentralisation led to a significant increase in community spending on social infrastructure (health and education) in communities which observed strict adherence to customary laws and had a tradition of local democracy. We argue that investment in transport and communication facilitates exchange with outsiders and improves the outside options of community members, thus making it more difficult to sustain intra-community cooperation. Consequently, communities which enjoy a high level of cooperation in collective activities benefit less from investing in transport and communication and are more inclined to invest in social infrastructure.
Pal S (2015) Impact of Hospital Delivery on Child Mortality: An Analysis of Adolescent Mothers in Bangladesh, Social Science & Medicine 143 pp. 194-203 Elsevier
New medical inventions for saving young lives are not enough if these do not reach the children and the mother. The present paper provides new evidence that institutional delivery can significantly lower child mortality risks, because it ensures effective and timely access to modern diagnostics and medical treatments to save lives. We exploit the exogenous variation in community?s access to local health facilities (both traditional and modern) before and after the completion of the ?Women?s Health Project? in 2005 (that enhanced emergency obstetric care in women friendly environment) to identify the causal effect of hospital delivery on various mortality rates among children. Our best estimates come from the parents fixed effects models that help limiting any parents-level omitted variable estimation bias. Using 2007 Bangladesh Demographic Health Survey data from about 6000 children born during 2002-2007, we show that, ceteris paribus, access to family welfare clinic particularly boosted hospital delivery likelihood, which in turn lowered neo-natal, early and infant mortality rates, especially among adolescent mothers after the completion of Women?s Health Project in 2005; infant mortality for this cohort was more than halved if delivery took place in a health facility. Our analysis thus highlights the potential benefits of institutional delivery in women friendly environment that may save lives of newborn children, especially among young adolescent mothers.
Pal Sarmistha, Saher Z (2016) Disclosure and Firm Financing: Impact of Clause 49 on Corporate Capital Structure in India,
Paper was nominated among the top 5 best papers at FMA(Sydney) 2016, FMA(Boston) 2017; it was also presented at the Indian Economic Growth Conference, Indian Statistical Institute (New Delhi).
Nishijima M, Pal Sarmistha (2017) Compulsory High Schooling, Over-Crowding and Violent Youth Crime - Evidence from a Recent Constitutional Amendment in Brazil,
The paper exploits the 2009 Constitutional Amendment in Brazil that introduced compulsory high schooling of 16-17 years olds as a natural experiment to investigate the effects of high schooling on selected violent youth crime indices. Using a unique data compiled from various official sources for over 5000 Brazilian municipalities over 2000-2013, we find the following: while the Amendment was successful to lower violent youth crime rates in the overall sample, the impact was relatively small because it worked primarily through incapacitation because of compulsory schools. There is no evidence that it boosted employment prospects or returns to schooling in the treated municipalities. More importantly the Amendment fails to lower youth crime rates in the poorer municipalities where over-crowding in classes increased after the Amendment, thus deteriorating the school?s learning environment. Unlike much of the previous literature that focused on more developed countries, a key finding of our study is that good governance and learning environment is a pre-requisite for reaping the benefits of compulsory high schooling in an emerging economy; the result has important implications for other countries beyond the Brazilian border.
Pal Sarmistha, Saha B (2017) Enhancing Excellence: Socially Motivated Private Schools of Nepal, pp. 1-36
Social motivation can promote efficiency of public service delivery though its role in providing schooling is little understood. We provide both theoretical and empirical insights as to why not-for-profit private schools could enhance excellence in schooling, using Nepal as a case study. Results suggest that socially motivated trust schools outperform all other types of schools irrespective of whether we consider standardised test scores, absolute or relative to school expenditure per student. Results are robust and highlight that trust school?s social objective, coupled with private financing, ownership and management that minimises its agency costs, is key to their value for money.
Pal Sarmistha, Saher Zoya (2017) An Unintended Consequence of Historical Land Ceiling Legislations: Impact on Land Acquisition and Corporate Investment in India,
There is a growing debate about land acquisition for infrastructure and industries in many densely populated countries. In this context, the present paper assesses the impact of the historical land ceiling legislations, largely implemented during 1960-85 to promote distributional equity, on corporate investment in India. We argue that the implementation of the land ceiling legislations had increased the transaction costs of buying land and also the price premium firms pay when acquiring land, thus inducing firms to invest less in land and capital. The detrimental ceiling effect is more pronounced when the ceiling size is more restrictive as for the most fertile land. Arguing that the variation in land ceiling size across the Indian states over time was largely dependent on choice of crops or soil fertility and as such could be treated as independent of the state authorities, our results support the conjecture that more restrictive land ceiling size has led to lower investment in both fixed and total capital output ratios at the state-level (1960-85). Further analysis of firm-level (1996-2012) data confirms that the ceiling effect persists in the long run, thus identifying an unintended consequence of land ceilings for investment and economic growth in the Indian states.
González P, Montes Rojas G, Pal Sarmistha (2017) Dual Practice by Health Workers: Theory and Evidence from Indonesia, In: IZA Discussion Paper No. 11038
Using a simple theoretical model we conjecture that dual practice may increase the number of patients seen but reduce hours spent at public facilities, if public physicians lack motivation and/or if their opportunity costs are very large. Using data from Indonesia, we then test these theoretical conjectures. Our identification strategy relies on a 1997 legislation necessitating health professionals to apply for license for private practice only after three years of graduation. Results using a difference-in-difference regression discontinuity design provides support to our conjectures, identifying the role of weak work discipline, lack of motivation and opportunity costs of public service provision.
Banerjee S, Masulis R, Pal Sarmistha (2016) Regulation and Firm Value: Curious Case of Transparency and Disclosure Laws in Russia, In: IZA Discussion Paper No. 9890
We provide novel evidence on the effectiveness of mandated changes in Russian transparency and disclosure (henceforth T&D) rules in boosting shareholder welfare. We focus on the staggered implementation of these T&D reforms initiated in 2002 and implemented during 2003-07. Using difference in difference method, we find that the reforms improved earnings quality, which on average reduced the operating performance (i.e., EBIT/Assets) of treated domestically-listed (relative to our control group of cross-listed) Russian firms, but had no significant impact on their market valuation. We argue that low tax alignment, where financial statements are not used for tax purposes, made it possible for managers of domestically-listed firms to inflate pre-reforms earnings, which became difficult post-reforms, leading to a drop in operating earnings. Yet, firm values, on average, remained unchanged because the drop in earnings was roughly offset by a decrease in the required market return due to more reliable accounting information post reform. Also, T&D reforms had negligible effects on cross-listed firms that act as our control group. Further, for domestically listed firms without a domestic controlling shareholder, post-reform reported earnings did not drop, while firm value increased significantly. For the domestically listed firms with a controlling shareholder, just the opposite occurred. Thus, a key finding of our study is that a strong governance structure is a prerequisite for significant gains in shareholder wealth following improved reliability of firm accounting information.
Bhaumik S, Owolabi O, Pal S (2018) Private information, institutional distance, and the failure of cross-border acquisitions: Evidence from the banking sector in Central and Eastern Europe, Journal of World Business 53 (4) pp. 504-513 Elsevier
In this paper, we develop an information theory-based framework about cross-border acquisitions in the financial intermediation industry. We argue that even though ?soft? information embedded in customer relationships of local banks can, in principle, help multinational banks (MNBs) overcome informational disadvantage in host countries, the cost of verification of this private information may, paradoxically, make local banks with significant customer relationships unattractive for cross-border acquisition. Further, we propose that the relationship between the amount of customer information embedded in an incumbent bank and the likelihood of its acquisition by a MNB is modified by the institutional distance between the home and host countries of the MNB. Specifically, the strength of the negative relationship increases with institutional distance between home and host countries because it increases the verification cost of private information with institutional distance. Our hypotheses find support in the context of Central and Eastern Europe.
Pal Sarmistha, Saha Bibhas (2018) Enhancing Excellence: Socially Motivated Private Schools of Nepal, Journal of Development Studies Taylor & Francis
Social motivation can promote efficiency of public service delivery though its role in
providing schooling is little understood. We provide both theoretical and empirical insights as to why
not-for-profit private schools could enhance excellence in schooling, using Nepal as a case study.
Results suggest that socially motivated trust schools outperform all other types of schools irrespective
of whether we consider standardised test scores, absolute or relative to school expenditure per student.
Results are robust and highlight that trust school?s social objective, coupled with private financing,
ownership and management that minimises its agency costs, is key to their value for money.
providing schooling is little understood. We provide both theoretical and empirical insights as to why
not-for-profit private schools could enhance excellence in schooling, using Nepal as a case study.
Results suggest that socially motivated trust schools outperform all other types of schools irrespective
of whether we consider standardised test scores, absolute or relative to school expenditure per student.
Results are robust and highlight that trust school?s social objective, coupled with private financing,
ownership and management that minimises its agency costs, is key to their value for money.
Owolabi O, Pal S (2013) Does Business Networking Boost Firms? External Financing
Opportunities? Evidence from Central and Eastern Europe, Applied Financial Economics 23 (5) Routledge
Opportunities? Evidence from Central and Eastern Europe, Applied Financial Economics 23 (5) Routledge
The paper argues that networked firms are likely to have an advantage in securing bank finance in countries with weak legal and judicial institutions since it helps banks and
other financial institutions to minimize the underlying agency costs of lending. An analysis of recent BEEPS data from fifteen Central and Eastern European (CEE)countries lends some support to this hypothesis. Even after controlling for other factors, firms affiliated to business associations are more likely to secure bank finance. Further,the importance business networking is particularly evident among firms who borrow from private domestic banks, as these new banks attempt to minimize costs of adverse
selection. There is also some confirmation that the significance of networking disappears with improvement in institutional quality.
other financial institutions to minimize the underlying agency costs of lending. An analysis of recent BEEPS data from fifteen Central and Eastern European (CEE)countries lends some support to this hypothesis. Even after controlling for other factors, firms affiliated to business associations are more likely to secure bank finance. Further,the importance business networking is particularly evident among firms who borrow from private domestic banks, as these new banks attempt to minimize costs of adverse
selection. There is also some confirmation that the significance of networking disappears with improvement in institutional quality.
?Effects of bank debt relationships on corporate performance? is an empirical survey based on a unique recent dataset regarding German manufacturing firms for the years 2003?2010. It seeks to understand the opportunities for German banks to offer services solely linked to information generated within loan-monitoring processes, relaxing the common assumption that banks are informationally disadvantaged because credit mar-kets do not perfectly equalize in prices but in the bank-optimal rate; the existence of red-lining and rationing demonstrates credit markets? informational imperfection. The flow of information in credit markets is basically one way, and banks improve their abilities to distinguish borrowers to prevent related losses. Therefore, they are able to generate new information that is then used for further borrower evaluation.
This newly generated information is assumed to be superior to borrowers? knowledge, and borrowers might recognize and anticipate this information. Therefore, the informa-tional chain evolves into the proposed theory of the customer-improving loan-monitoring cycle. It is assumed to be true if borrowers with bank debt show better results than borrowers without. Related hypotheses regarding corporate performance preferably are tested by using return on equity. Additionally, net operating margin, net interest, and return on investment are checked for their patterns. They are supplemented by sus-tainability tests regarding the equity-to-debt ratio and the distance-to-default point to evaluate whether positive effects are based on chance or opportunistic behaviour.
All performance hypotheses are rejected. Therefore, the proposed theory does not find support from the evidence, and banks? informational disadvantage remains ? even if their borrower evaluation is actually more detailed than before. Accordingly, the survey shows that loan monitoring does not offer informational links to generate new products or services, and banks remain limited to their already applied approaches. German cor-porate performance is basically convexly associated with firm size, and firm perform-ance clearly differs depending on firms? riskiness. However, risky firms? results are superior if they report bank debt because banks? related monitoring generates moderat-ing effects. Thus, particularly risky firms are suggested to use bank debt.
This newly generated information is assumed to be superior to borrowers? knowledge, and borrowers might recognize and anticipate this information. Therefore, the informa-tional chain evolves into the proposed theory of the customer-improving loan-monitoring cycle. It is assumed to be true if borrowers with bank debt show better results than borrowers without. Related hypotheses regarding corporate performance preferably are tested by using return on equity. Additionally, net operating margin, net interest, and return on investment are checked for their patterns. They are supplemented by sus-tainability tests regarding the equity-to-debt ratio and the distance-to-default point to evaluate whether positive effects are based on chance or opportunistic behaviour.
All performance hypotheses are rejected. Therefore, the proposed theory does not find support from the evidence, and banks? informational disadvantage remains ? even if their borrower evaluation is actually more detailed than before. Accordingly, the survey shows that loan monitoring does not offer informational links to generate new products or services, and banks remain limited to their already applied approaches. German cor-porate performance is basically convexly associated with firm size, and firm perform-ance clearly differs depending on firms? riskiness. However, risky firms? results are superior if they report bank debt because banks? related monitoring generates moderat-ing effects. Thus, particularly risky firms are suggested to use bank debt.
Saher Zoya (2019) Three essays on the effect of regulations on corporate capital structure, investment & performance.,
This research aims to examine the effects of regulations and institutions on key decisions of a firm. These include firm?s capital structure and investment decisions, which in turn affect firm performance. In particular, we consider India?s emerging market economy and the UK?s developed economy as specific case studies.
The Thesis consists of three key empirical papers. In the first paper, we use the introduction and completion of Clause 49, a transparency and disclosure reform aimed at strengthening investor protection, as a natural experiment to estimate the effect of increased disclosure on reliance of debt/equity using firm-level panel data for the period 1996-2014. This helps us to redress the potential endogeneity of firm-level disclosure on capital structure decisions. Estimates of difference-in-difference models suggest that the introduction and completion of Clause 49 led to a greater (lower) reliance on equity (debt) and also a reduction in reliance on bank loans among domestic listed (relative to cross-listed) Indian firms in our sample; however, similar effect was not observed among firms belonging to business groups. We then explore possible channels through which increased disclosure can influence capital structure choices of different groups of firms.
In the second paper, we examine the effects of executive compensation on corporate capital structure and market performance using the introduction of Director?s Remuneration Regulation (DRR2013) in the UK as a natural experiment. Given the potential endogeneity of executive compensation, we use the introduction of DRR2013 as a natural experiment to identify the causal effect of executive compensation on corporate capital structure in the UK. Results from our analysis suggest that an increase in equity based compensation share decreases firm?s reliance on debt and improves firm performance; an increase in bonus compensation share, however, leads to an increase in reliance on debt but doesn?t seem to have a significant effect on performance. We attribute these results to the debt agency theory, after controlling for managerial over-confidence indices.
Finally, the last paper uses India?s historical land ceiling legislation to estimate its effect on land acquisition for industries affecting corporate investment in India. We argue that the implementation of the land ceiling legislations had increased the transaction costs of buying land and the price premium firms pay when acquiring land, thus inducing firms to invest less in land and capital. Moreover, the adverse effect of land ceiling legislations is worse in states with more fertile land that had lower ceiling size under the ceiling legislation. Analysis using the state-level data over 1960-85 during the period most of these legislations were formulated confirms our conjecture; the adverse effects of lower ceiling size on corporate investment seem to persist in the long- run over 1960-2015.