Archive for May 20th, 2020

Why Women Make Better Crisis Leaders

May 20, 2020

Raj Persaud in this Proj Synd piece says the reason for success of women leaders is not because of feminine qualities.

Infact they succeed against all odds:

Just as leaning into masculine stereotypes seems to correlate with poor pandemic responses, many observers seem to believe that woman leaders’ success may be rooted in their traditionally “feminine” qualities, such as empathy, compassion, and willingness to collaborate. Forbes called Norwegian Prime Minister Erna Solberg’s televised address to her country’s children an example of the “simple, humane innovations” that are possible under female leadership.

This reading is outdated, reductive, and simply wrong. Trump and his ilk may act tough, but ultimately their leadership is an incompetent charade of bluster, vacillation, and self-aggrandizement. High-performing female leaders, by contrast, have been resolute, assessed the evidence, heeded expert advice, and acted decisively.

Following the mantra “go hard and go early,” Ardern imposed a strict lockdown four days before New Zealand’s first COVID-19 death. Taiwanese President Tsai Ing-wen introduced more than a hundred public-health measures in January – when the World Health Organization was still casting doubt on the possibility of human-to-human transmission.

If traditionally “feminine” traits don’t explain female leaders’ strong performance in times of crisis, what does? The answer may be related to the path women take to power, which is generally more demanding than that faced by men. In particular, it may be linked to the “glass cliff” phenomenon, whereby women are more likely than men to be appointed to leadership positions that are “risky and precarious.”

Research into the glass cliff began with the finding that, before appointing men to their boards, companies in the Financial Times Stock Exchange 100 Index typically experienced stable share prices. Before appointing a woman, however, those same companies often experienced five months of poor share-price performance. Another study found that companies listed on the UK stock exchange tended to increase gender diversity on their boards after experiencing big losses.

A similar tendency can be seen in politics. Margaret Thatcher became leader of a Conservative Party in crisis, and prime minister after a “winter of discontent.” Archival analysis of the 2005 UK general election found that female Conservative Party candidates tended to contest seats that would be significantly more difficult to win (judged according to their rival’s performance in the previous election).

Ardern also got her break by being thrust onto a glass cliff: she became the leader of New Zealand’s Labour Party in 2017 after poor polling forced her predecessor to resign. A mere two months later, she became the country’s youngest prime minister in 150 years.

According to the researchers, the glass cliff may appear because organizations are more willing to challenge the status quo when the status quo isn’t working. The visible difference of having a woman in charge could also reassure stakeholders that change is happening. As for the women, they may be more likely to accept leadership positions in times of crisis because they have fewer opportunities to reach the top. They can’t simply wait for an easier post to open up.

SEBI’s Department of Economic and Policy Analysis Internship Programme 2020-21

May 20, 2020

SEBI’s Department of Economic and Policy Analysis has an interesting year long internship opportunity for PhD (Finance) students. Interested aplicants should have completed atleast  years of Phd Work.

Last date of receiving application is June 10, 2020. Pass on the word to interested students.

Determinants of Loan Loss Provisions: The Case of Indian Banks

May 20, 2020

Rekha Misra, Radheshyam Verma and Samudra Biswas in May 2020 Monthly Bulletin look at how India’s banks make loan provisions:

The paper attempted to examine the impact of both discretionary and non-discretionary factors on loan loss provisioning by Indian banks during 2005-2017. Most of the non-discretionary factors were found to be quite significant in explaining the changes in provisioning while amongst the discretionary factors only income smoothing via loan loss provisioning existed in Indian banks.

Our findings suggest that India’s loan loss provisioning is pro-cyclical which can amplify the business cycles. Moreover, it was found that provisioning by PSBs was more pro-cyclical as compared to PVBs. In this context, the implementation of Indian Accounting Standards (Ind-AS), which requires banks to make provisions for expected credit losses from the time a loan is originated rather than awaiting ‘trigger events’ signalling imminent losses, is expected to help address this issue. Recognising and providing for actual and potential loan losses at an earlier stage in the credit cycle could potentially reduce pro-cyclicality and foster financial stability as Ind-AS requires a dynamic approach to provisioning based on expected credit losses, instead of the current system which is based on days-past-due.

For further research it would be interesting to explore which kind of provisioning practices are more pro-cyclical, i.e., specific or general provisioning as that would give an intuition in terms of the direction that dynamic provisioning should focus on. Additionally, it would be interesting to see whether corporate governance via earnings management is a significant determinant of loan loss provisioning.


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