krishna swamy

Western Michigan University, Finance and Commercial Law, Faculty Member

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Offshore Outsourcing Contracts: Real Options Analysis Using Trinomial Option Pricing Model

GLOBAL BUSINESS & FINANCE REVIEW, 2015

Offshore outsourcing or offshoring is defined as the practice of moving employees or certain busi... more Offshore outsourcing or offshoring is defined as the practice of moving employees or certain business activities to foreign countries as a way to lower costs, acoid taxes, and essentianlly add to the bottom line of a company or organization. Because emerging market countries offer low labor costs, developed companies move their business processes including manufacturing and other supporting activities like accounting, taxation, payroll, customer service functions. These savings therefore create value for stockholders. The offshore outsourcing often includes

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Neural Network Applications in Finance: A Practical Introduction

Neural Networks (NN) are trainable analytical tools that attempt to mimic information processing ... more Neural Networks (NN) are trainable analytical tools that attempt to mimic information processing patterns in the human brains. NNs are applied to a wide variety of pattern recognition problems and are sueful in many financial applications such as: stock price predictions, development of security trading systems, modeling foreign exchange markets, prediction of bond ratings, forecasting financial distress, and credit fraud detection and prevention. NN software is readily available but costly. Large data sets are required to train NNs, although NNs can function well in the presence of missing data. NNs are powerful for analyzing massive unstrutured and complex data sets. But NN have disadvantages which include: excessive itreations needed to train the NN, under- or overfitting data and difficulty interpreting results due to "black cox" nature of NN processing.

Capital Structure and Market Power Interaction and Firm Profitability: A USA Perspective

by Rathin Rathinasamy and krishna swamy

Using a sample of 585 U. S. firms over a period of 18 years from 1994 to 2011 and utilizing finan... more Using a sample of 585 U. S. firms over a period of 18 years from 1994 to 2011 and utilizing financial and stock-market data from Research Insight, this study tested the relationship between market power or product differentiation and capital structure (debt-versus-equity choice) by two way fixed effects time series cross sectional regression method; it also addressed the related proposed non-linear relation between market power and profitability of U. S. firms. Our results show a statistically significant cubic relation between two measures of Tobin's Q (market power,) namely product structure and two measures of capital structure, namely long-term debt to total assets and total debt to total assets. We also find a significant negative relation between debt ratios and lower levels of profitability, and positive relation between the two at higher levels of profitability. Further, we find a significantly positive relation between the growth rate of total assets and capital structure. Also, the relation between the natural logarithm of the number of shares and capital structure measures is positive. With regard to tangible fixed assets, we find support mostly for the trade-off hypothesis in that firms with higher fixed assets are able to use them as collateral to borrow more.

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ELECTRONIC PAYMENTS IN HEALTHCARE

In this paper the author has developed a theoretical framework for addressing the healthcare cost... more In this paper the author has developed a theoretical framework for addressing the healthcare costs and based on it he has analyzed the payment system that is an integral part of healthcare payments. The author concurs with the recommendations made in earlier studies that switching from a paper-based system to an electronic system would not only reduce costs but also improve the efficiency of the system. By using an electronic payment system for payment of healthcare claims, huge savings can be achieved on an annual basis, as the numbers of claims processed each year are in the billions.

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AN ANALYSIS OF THE PERFORMANCE OF PRIVATE EQUITY: AGENCYCOST APPROACH

In this paper, we explore the effects of agency costs on the performance of private equity. We di... more In this paper, we explore the effects of agency costs on the performance of private equity. We discuss why private equity firms generally have much lower agency costs. We show using Capital Asset Pricing Model approach that private equity funds would be better off by investing in firms with low beta than high beta firms.

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CORPORATE MERGERS AND THE IIMPACT OF PRE--MERGER VARIIANCE,, LEVERAGE AND MATURIITY OF BONDS ON WEALTH TRANSFERS

by krishna swamy and Rathin Rathinasamy

This paper addresses several hypotheses concerning wealth transfers among bondholders and stockho... more This paper addresses several hypotheses concerning wealth transfers among bondholders and stockholders in two firms which merge. In so doing, several refinements relative to the previous research in this area are introduced. We find evidence which supports the presence of diversification effects (coinsurance) to some bondholders, incentive effects (risk increases) to other bondholders, and wealth transfers between stockholders and bondholders. This study examines the impact of 49 industrial mergers between 1970 through 1984 on the returns to bondholders and stockholders of the merging firms. Results indicate that bondholders of the acquired firm group gain significantly in the announcement month, suggesting a diversification effect for acquired firm bondholders. Acquiring firm bondholders suffer significant losses in the pre-announcement month supporting the incentive effects hypothesis for the acquiring firm bondholders. Further analysis indicates that abnormal returns to bondholde...

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“Capital Structure and Product Market Interaction: An International Perspective,”

by Rathin Rathinasamy and krishna swamy

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Capital Structure and Market Power Interaction and Firm Profitability: A USA Perspective

GLOBAL BUSINESS & FINANCE REVIEW, 2013

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The Structure, Conduct and Performance of Publicly Traded Commodity Funds: A Review

SSRN Electronic Journal, 2000

ABSTRACT This paper provides a comprehensive review of a decade of research on commodity funds. O... more ABSTRACT This paper provides a comprehensive review of a decade of research on commodity funds. Overwhelming evidence indicates that commodity funds are low return, high risk investments. Results also indicates that commodity funds exhibit skewness, thereby offering investors potential for large gains. Research has also shown that they are a poor hedge against inflation.Further more, funds with low standard deviations produce superior performance in the future as measured by the Sharpe ratio.

Agency costs and the discount rate for public sector enterprises

Journal of Economics and Finance, 1994

In this paper, we examine the implications of agency costs on the discount rate for public sector... more In this paper, we examine the implications of agency costs on the discount rate for public sector enterprises (PSEs); we do this in the framework of the Capital Asset Pricing Model. With the addition of agency costs, the discount rate for Public Sector Enterprises (PSEs) under uncertainty becomes the risk-adjusted discount rate plus a premium for agency costs; under certainty, the discount rate for PSEs is shown to be the risk-free rate plus a premium for agency costs. Use of a discount rate by PSEs without adjusting for agency costs both under certainty and uncertainty, will lead to sub-optimal capital investment decisions by PSEs.

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The Cost of Bond Covenant Restrictions on the Disposition of Assets

Journal of Business Finance <html_ent glyph="@amp;" ascii="&"/> Accounting, 1997

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Neural Network applications in Finance: A Practical Introduction

This paper discusses numerous applications of neural networks (NN) in the area of finance. NNs a... more This paper discusses numerous applications of neural networks (NN) in the area of finance. NNs are trainable analytical tools that attempt to mimic information processing patterns in human brain. First, NNs should be trained using data to recognize patterns. Afterwards, it can be used to find patterns in new set of data. NNs useful in analyzing large, unstructured data sets as in finance.

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Offshore Outsourcing Contracts: Real Options Analysis Using Trinomial Option Pricing Model

by krishna swamy and Rathin Rathinasamy

This is an analytical paper that analyzes offshore outsourcing contracts using "Trinomial Option ... more

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