Institutional EYE

Commentary on Corporate Governance Issues

Can a broken songbird sing?

Never waste a good crisis. The audit industry needs to be fixed and recent developments provide the perfect trigger to rethink its future. It is a scary time for the big four auditors in India. Their worry is not so much the business model of providing audit and a myriad of non-audit services; that, if regulators demand, they will reluctantly tweak. It is the audit quality and the numbers they are printing, that shareholders, lenders and regulators are now questioning. Look around. The Securities and Exchange Board of India (SEBI) banned PwC in 2018 from auditing listed companies for two years for its involvement in Satyam Computers Services Limited. Last month, the Reserve Bank of India bar

A three-point agenda to boost investor confidence

To achieve sustained economic growth, the Modi Government 2.0 will need to boost investor confidence. For this, the efficacy and quality of capital are paramount. Better corporate and regulatory behaviour, and a stronger redressal mechanism, will deter errant corporate behaviour and help create a responsible and empowered investor community. The central agenda for the next five years of Modi Government 2.0 will be economic growth and job creation. For this, industry will need capital to grow – in the form of both, foreign direct investments (FDI) and foreign portfolio inflows (FPI). Several reforms during the Modi Government 1.0 have helped build investor confidence, which caused an improvem

SEBI’s guidelines for enhanced disclosures by credit rating agencies: Creating a more transparent cr

We look at SEBI’s recent announcement and explain what these will mean for the market Securities and Exchange Board of India (SEBI) published its ‘Guidelines for enhanced disclosures by credit rating agencies,’ on 13 June 2019. These are focussed on disclosures relating to computation of cumulative default rates and introducing probability of default benchmarks. The guidelines focus on liquidity indicators - usually taken for granted, the absence of liquidity has debilitating consequences for those holding the paper. These guidelines introduce the suffix ‘credit enhanced’, ask rating agencies to focus on credit spreads and disclose at a broad level of operating and/ or financial performance

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