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WWW.IGNOUASSIGNMENTS.IN
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 ASSIGNMENT SOLUTIONS GUIDE (2017-2018)
I.B.O.-6
International Business Fiance
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and guidance
of the student to get an idea of how he/she can answer the Questions in given in the Assignments. We do not claim 100%

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accuracy of these sample answers as these are based on the knowledge and capability of Private Teacher/Tutor. Sample

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answers may be seen as the Guide/Help for the reference to prepare the answers of the Questions given in the Assignment.

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As these Solutions And Answers are prepared by the Private Teacher/Tutor so the chances of error or mistake cannot be
denied. Any Omission or Error is highly regretted though every care has been taken while preparing these Sample

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Answers/Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer and for up-to-date
and exact information, data and solution. Student should must read and refer the official study material provided by the

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university.
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Attempt all the questions.

country’s balance of payments?

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Q. 1. What is balance of payments? Explain its major components. Why is it useful to compute a
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Ans. The Balance of Payments, also known as BOP is a measure of the transactions that flow between any

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individual country and all other countries. It is used to collect the information on all international economic transactions
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for that country during a specific time period, usually a year. The balance of payment is defined on the basis of the
country’s exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all
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payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits).

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Balance of payments is one of the major indicators of a country’s status in international trade, with net capital

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outflow. The balance, like other accounting statements, is prepared in a single currency, usually the local currency.

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Foreign assets and flows are calculated at the exchange rate of the time of transaction. However, there is a difference
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between market balance of payments and accounting balance of payment. The market balance of payment reflects
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the relationship between current inflow and outflow of both the capital and account transactions. An accounting

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balance of payment is a periodic statement of all external and internal transactions within a country during a year or
any given period of time.

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Balance of Payment of a country is considered to be one of the imperative indicators for International Trade,

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which significantly affect the economic policies of a government. As every country struggle to have a favourable
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balance of payments, the trends in, and the position of, the balance of payments will considerably influence the nature

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and types of regulation of export and import business in particular.
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Balance of Payments is a methodical and abstract record of a country’s economic and financial transactions with
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the rest of the world over a given period of time. The balance of trade takes into account only the transactions arising

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out of the exports and imports of the visible terms; it does not consider the exchange of invisible terms, such as the
services rendered by shipping, insurance and banking; payment of interest, and dividend; expenditure by tourists, etc.
However, the balance of payments takes into account the exchange of both the visible and invisible terms. Hence, the
balance of payments presents a better picture of a country’s economic and financial transactions with the rest of the
world than the balance of trade.
The transactions that fall under balance of payments are recorded in the standard double-entry book-keeping
form, under which each international transaction undertaken by the country results in a credit entry and a debit entry
of equal size. As the international transactions are recorded in the double-entry book-keeping form, the balance of
payments must always balance. In other words, the total amount of debts must equal the total amount of credits.
Sometimes, the balancing item, error and omissions, is required to be added to balance the balance of payments.

WWW.IGNOUASSIGNMENTS.IN 2
 International transactions might be considered as barter, implying exchange of goods for goods, services for
services, goods for services and vice versa. Also, these goods and services could be exchanged with money. This
involves buying and selling of foreign currencies, apart from transfer of money forming the part of current account.
Also, the capital account and official reserves can be represented in terms of money. Barter traders are used rarely
to eliminate the BOP issues.
In the year 1995, there were three known markets of foreign exchange in London, New York, and Tokyo. This
was followed by markets of Singapore, Hong Kong, Zurich, Frankfurt and Paris. But these markets were soon
affected by deep financial crisis in the year 1997. This further declined the role and power of Central Banks to
intervene and adjust the exchange rate.
“Net transfers” determines the country’s balance of indebtness which may have a positive or negative value. The
instant impact on BPO is considered to be favourable, if the inflow of international debt is greater than the outflow
including payment of interest or repayment of debt. However, the BOP is referred as trained if the outflow value

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exceeds the inflow, but the total quantum of indebtness would be reduced. Also, in both the case, the most crucial
factor is that the external assistance is completely and appropriately utilized.
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Various adjustment policies are adopted for controlling the situations, where the country is faced with a massive

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or persistent unfavourable balance on current account or capital account or balance of indebtness. These adjustments

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may be unilateral, bilateral, regional and multilayer adjustments. These may further include inter alias, fiscal policies,

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monetary policies, and commercial policies. This also includes exchange rate adjustments. Devaluation acts as a

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double- edge weapon and is widely used as a remedy. Only in the case if the price elasticity of demand is greater than

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the value for a country's export abroad and for its import at home, it may deliver the goods. In other cases, the position
of BOP/BOT may further worsen.

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Introduction of the common currency or the creation of the Rupee Area is considered as the best regional

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solution. Also, free multilateral convertibility of all currencies for the whole world is considered to be an effective

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solution for BOP difficulties. The IMF and other multilateral agencies have strived towards this end since 1945.
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Following the appearance of GATT, the quarter century can be looked upon as the golden age of global trade. On the
other hand, the WTO accord which was operational in the year 1995 is considered to have shifted the focus from

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trade to investment. This also includes, intellectual property rights, social clauses like child labour and human rights

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and adjudication of complaints and disputes over 100 in number during the first three years 1995, 1996 and 1997.

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There are three biggest foreign exchange markets of the world London, New York and Tokyo. The turn over of

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London exchange market is estimated as $464 billion for 1995 on daily basis. The same for New York is estimated as
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$ 244billion and for Tokyo it is estimated as $161 billion. However, Singapore is considered as the forth biggest
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exchange market with the turn-over of $100 billion and rest follows.
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Q. 2. (a) Discuss the advantages and disadvantages of gold standard.
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Ans. The first modern international monetary system was the gold standard. The gold standard provided for the

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free circulation between nations of gold coins of standard specification. Under the system, gold was the only standard
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of value. The groundwork of the gold standard is that a currency's cost is supported by some weight in gold. Under
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the gold standard system and based on its gold value, all participating currencies were convertible. Because currencies

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were convertible in gold, then nations could ship gold among them to adjust their "balance of payments."

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In theory, all nations should have an optimal balance of payments of zero, i.e. they should not have either a trade
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deficit or trade surplus. At the turn of the 20th century, many major trading nations used the gold standard to adjust
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their monetary supply. However, the processes of the gold standard in reality lead to many issues.

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The operation of the gold standard in reality caused many problems. When gold left a nation, the ideal balancing
effect would not occur immediately. Instead, recessions and unemployment would often occur. This was because
nations with a balance of payments deficit often neglected to take appropriate measures to stimulate economic
growth. Instead of altering tax rates or increasing expenditures - measures which should stimulate growth - governments
opted to not interfere with their nations’ economies. Thus, trade deficits would persist, resulting in chronic recessions
and unemployment.
With the eruption of the First World War in the year 1914, the international trading system busted out. Government
of respective nations took their currencies off the gold standard and simply ordered the value of their money. Subsequent
to the war, few nations tried to re-establish the gold standard system at pre-war rates, but drastic changes in the global
economy made such attempts ineffective. This leads to rise of Gold Exchange Standard. Under this new system,
currencies would be transferable not in gold but in the leading post-war currencies of the associated nations.

WWW.IGNOUASSIGNMENTS.IN 3
 (b) What were the objectives of Bretten Woods System?
Ans. The Bretton Woods System as a monetary management system was set as the rules for commercial and
financial relations among the world's major industrial nations. The planners at Bretton Woods established the International
Bank for Reconstruction and Development (IBRD) (now known as one of the five institutions in the World Bank
Group) and the International Monetary Fund (IMF) The reason behind setting up such a system of rules, institutions,
and procedures was to manipulate the international monetary system. After satisfactory number of countries had
ratified the agreement, this system became operational in the year 1946.
Under main features of the Bretton Woods system, it was an obligation for each country to adopt a monetary
policy that maintained the exchange rate of its currency within a fixed value. This value was expressed in
terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain,
the system collapsed in 1971, following the United States’ suspension of convertibility from dollars to gold.

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By this time, due to inflation in the United States and a growing short fall in American trade were depressing the

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value of the dollar. Americans advocated Germany and Japan to appreciate their currencies. But both of the countries

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already had favourable payments balances. And both of the nations were disinclined to this decision. Because of the
reason that raising their currency value might result in increased prices for theire goods and which can further affect

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their exports. Lastly, the United States neglected the fixed rate of the dollar and allowed it at "float" rate. This meant

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to change the value of dollar against other currencies. The value of dollar swiftly started falling down. World leaders

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wanted to stimulate the Bretton Woods system in 1971, but the effort failed. By 1973, the float rate system was
adopted by United States and other nations.

transaction exposure using the forward market hedge and money market hedge?
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Q. 3. Define transaction exposure. How is it different from economic exposure? Discuss and compare
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Ans. The risk faced by companies involved in international trade, that currency exchange rate will change after

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the companies have already entered into financial obligations. Such exposure to fluctuating exchange rates can lead
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to major losses for firms.
Often, when a company identifies such exposure to changing exchange rates, it will choose to implement a
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hedging strategy, using forward rates to lock in an exchange rate and thus, eliminate the exposure to the risk.

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Transaction exposure arises, when a firm faces contractual cash-flows that are fixed in a foreign currency. In

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other words, whenever a firm has foreign-currency-denominated receivables or payables, it is subject to transaction

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exposure, and the eventual settlements have the potential to affect the firm's cash flow position. Since modern firms
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are often involved in commercial and financial contracts denominated in foreign currencies, management of transaction
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exposure has become an important function of international financial management. Transaction exposure thus in

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simple words, defined as the amount of foreign currency that is receivable or payable.
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As it’s a well known fact that foreign exchange rates are highly volatile. In a free market, changes occur

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practically every second. The movement in foreign exchange rates occurs as a result of genuine trade transactions in

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the care of highly regulated markets like the Indian market where speculation is strictly prohibited. Thus, export and
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import transactions or borrowings and lending in foreign currency move foreign exchange rates in India.

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The intra-day trends may be more predictable than slightly longer-term trends; but the uncertainty does exist. And
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where there is a substantial time gap between the date of the contract and its maturity, the uncertainty can be quite
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fearsome. The time gap will depend on the credit period permissible for such transactions. At present, the Reserve

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Bank of India permits a credit period of up to six months or 180 days to be precise, for export and import transactions.
Now, surely, 180 days is a long enough periods for forecasts of movements in foreign exchange rates to be
rendered imprecise. Hence, there arises a transaction exposure which needs to be measured and managed well in
order to minimize its negative effect on corporate profitability or wealth. The treasury departments managing foreign
exchange fluctuations are sometimes looked upon as profit centres whereby, the main objective becomes that of
making a profit out of foreign exchange movements. Yet, the primary aim remains that of avoiding the uncertainty
relating to the future exchange rate that will prevail on the date the contract matures. A company’s transaction
exposure is thus measured as currency by currency and equals the difference between contractually fixed future
cash inflows and outflows in each currency.
Fluctuations in the exchange rates affect the overall performance of banks through foreign currency transactions
and operations. Nevertheless, even without such activities, exchange rate swings can influence banks circuitously,

WWW.IGNOUASSIGNMENTS.IN 4
through their effect on the extent of foreign competition, loan demand and other banking conditions. In international
finance, a firm's cash-flow exposure is described as transaction or economic exposure.
Transaction exposure is the risk that exchange rates can change in the short-term between the times of foreign
currency transaction is entered into and when it is settled. Economic exposure is the risk that exchange-rate changes
will alter the long-term future cash-flows of a firm and, thereby, the value of the firm. It is surprising that, even though
exchange rates are several times more volatile than the inflation or interest rates, the association between firm value
and exchange rates has not been the subject of much empirical research. The difference between the two exposures
can also be stated in following points :
● Accounting exposure is the component of foreign currency risk that results from translating the statements of
foreign subsidiaries into the reporting currency, which, in this course, is assumed to be Canadian dollars. The
amount recognized in the financial statements as foreign exchange gains/losses or other comprehensive
income (OCI) varies depending on the translation method used and does not necessarily represent realized

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● Economic exposure is the risk that changes to foreign exchange rates have on the earnings of foreign
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gains or losses. Accounting exposure exists only on those financial statement elements translated at the
current rate or future rates because these rates are constantly changing.

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operations and the long-term implications this may have to the parent. It is measured in true economic terms,

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that is, whether the entity is economically better or worse off due to the change in exchange rates. Economic

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well-offness is difficult to measure precisely.

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Financial statements attempt to reflect economic results. If so, foreign exchange gains/losses recognized in

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the financial statements ideally should reflect the true economic impact of foreign currency fluctuations.
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Translation methods based on the parent's relationship with its foreign subsidiary try to reflect the parent's

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exposure to exchange rate changes. Unfortunately, financial statements do not always accurately reflect
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economic reality, when we use historical cost accounting as our basis of measurement.
Economic Esposure
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Transaction Exposure
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1. A forward looking concept: it focuses on 1. A backward-looking concept: it reflects past

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future cashflows. decisions as reflected in the subsidiary's assets

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2. Involves real cash-flows, not just accounting 2. A change in an accounting value due to
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figures.

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translation is not a “realized” gain or loss; no

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3. Relates to changes in the economic value 3. Changes the firm’s accounting value, but not
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(or, in an efficient market, the market value)
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necessarily its market value.

of the firm.
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4. Contractual exposure depends on the firm's 4. Depends on the accounting rules chosen. This
portfolio of FC engagements undertaken in is because the subsidiary’s own internal rules
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the past. Operating exposure depends on

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the environment (especially the market depreciation, or inventory valuation methods)
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structure and the input-output mix) and on and also because the translation process itself

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of production, changes in the marketing mix
or financial structure, etc.).
5. Also exists for firms without foreign
can be done in different ways.

5. Accounting exposure only exists in the case

subsidiaries, such as exporting firms, import- of foreign direct investment, since pure
competing firms, and notably potential exporting or import-substituting firms have no
import-competing firms. foreign subsidiaries.

WWW.IGNOUASSIGNMENTS.IN 5
 Hedging techniques generally involve the use of complicated financial instruments known as derivatives. And
there are various techniques to hedging. Forward market hedge is one such technique. Perhaps the most direct and
popular way of hedging transaction exposure is by currency forward contracts or forward market hedge. Generally
speaking, the firm may sell (buy) its foreign currency receivables (payables) forward to eliminate its exchange risk
exposure. The term hedging refers to mean a transaction undertaken specifically to offset some exposure out of the
firm's usual operations. A forward market hedge refers to a transaction specifically undertaken in the forward market.
Transaction exposure can also be hedged by lending and borrowing in the domestic and foreign money markets–
that is, money market hedge. Generally speaking, the firm may borrow (lend) in foreign currency to hedge its foreign
currency receivables (payables), thereby matching its assets and liabilities in the same currency. As opposed to the
forward market, one may use the money market for the purpose of hedging transaction exposures. But for that, one
has to have access to international money market for short-term borrowings as well as investments. Essentially,

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money market involves arbitrage between the Euro deposit market and the spot and forward foreign exchange

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market. A money market hedge involves simultaneous borrowing and lending activities in two different currencies to
lock in the local currency value of a future foreign currency cash-flow.
Q. 4. Discuss the sources of long term external finance for MNC’s. How do they differ from those of

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domestic companies?

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Ans. External finance means funds provided to your business by third parties. Types of external finance include

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debt, equity, grants, gifts and services. External finance sources include banks and credit unions, venture capitalists,

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business angels, friends and family. In the 1950s and 1960s, developing countries were often hostile towards multinational
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investment and sought to control multinational companies’ activities through domestic and international regulations.

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During the last two decades, however, emerging countries have been falling over themselves to attract as much

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multinational investment as possible.

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This enormous shift in developing countries' stance towards multinational investment is associated with major

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changes that have occurred in the pattern of international capital flows to developing counties. The former may be
regarded as both a cause and a consequence of the latter. The most important change in capital flows for the purpose
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of this chapter is the emergence of FDI as a pre-dominant source of external finance for developing countries during

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the 1990s. Between 1996 and 1998, FDI inflows to developing countries constituted about 10 per cent of their gross
capital formation. It is also important to note that alongside these changes in the pattern of external finance, analysis
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and evidence suggest that developing countries' need for external finance has greatly increased. This is in part due to

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the liberalization of trade and capital flows in the international economy.
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In these circumstances, it is not surprising that developing countries have radically changed their attitude towards

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FDI. These counties, therefore, have competed intensely to attract FDI. This competition has resulted in a shift in the
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balance of power towards multinationals. An important objection is that if approved, it would worsen this imbalance

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because the Agreement would essentially give the multinationals a license to (or not to) invest, wherever or whenever
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they like regardless of the circumstance and needs of developing countries. Given the limited availability of official
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financial flows, it is essential to encourage private financial flows within a well-designed policy framework that
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maximizes the contribution of private flows to national development goals.

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Capital structure is essential for the survival, growth and performance of a firm. There has been a growing
interest worldwide in identifying the factors associated with debt leverage. However, nothing has been done so far in
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contrasting small and medium sized enterprises (SMEs) and large sized enterprises (LSEs) on these aspects. SMEs
are very important in the Greek manufacturing sector for employment and growth. Empirical studies show that capital
structure and the factors affecting it vary with firm size. The determinants of capital structure of Greek manufacturing
firms and formulate some policy implications that may improve the financial performance of the sector.
Our study utilizes panel data of two random samples, one for SMEs and another for LSEs. The findings show that
profitability is a major determinant of capital structure for both size groups. However, efficient assets management
and assets growth are found essential for the debt structure of LSEs as opposed to efficiency of current assets, size,
sales growth and high fixed assets, which were found to affect substantially the credibility of SMEs.
In an era of increasing globalization, the findings imply that Greek SMEs should focus their efforts on:
(a) increasing their cash-flow capacity through better assets management and achievement of higher exports,
and

WWW.IGNOUASSIGNMENTS.IN 6
 (b) ensuring good bank relations, but at the same time, turn to alternative forms of financing.
Greek LSEs should adopt strategies that will lead to the improvement of their competitiveness and securing new
forms of financing. Government policy measures aiming at structural changes and economic efficiency should be
designed clearly depending upon its targets.
SMEs need policies that will encourage information exchange and co-operation in local and foreign markets and
use of e-business, as well as, financial assistance. On the other hand, LSEs should be supported by policies aimed at
new high-technology investments, entrance of new firms and foreign investments in the country, tax alleviation and
increase of R&D and training expenditures. The upgrading and transparency of the capital market in Greece is
expected to improve the capital structure of Greek manufacturing firms.
Corporate and personal income tax regimes in different countries also influence choice of World-Wide Capital
structure. While in most of the countries, interest is tax deductible, effective rates of tax can significantly differ.
Dividend income, compared to interest income, is generally taxed leniently and many countries don't have capital gain

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tax. As capital gains are more likely to arise in the hands of equity investors than lenders, the expected return (that is
cost of equity from the company point of view) can be mainly lower.

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Bankruptcy costs mainly depend on the probability of bankruptcy which not only depends on business risk but also

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inclination of lenders to file for bankruptcy. The inclination to file for bankruptcy is generally seen higher among

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individual lenders than institutional lenders, particularly the one closely associated with borrowers like in Japan. Thus,

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bankruptcy costs also influence world-wide capital structure. The costs of bankruptcy includes legal and administrative

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expenses and the inability to continue business as usual. This leads to the tradeoff theory of capital structure. As we
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saw earlier in the course, when a firm has debt, there are conflicts of interest between creditors and shareholders.

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Shareholders may act in a way that helps them, but hurts the firm overall. A firm in financial distress may–
●

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Take large risks that benefit shareholders if they succeed, but hurt creditors, if they fail.
Not undertake needed investments, since the benefits will accrue to creditors, if bankruptcy occurs
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●

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Milk the company of assets in the face of impending bankruptcy.

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The main argument for some debt in the capital structure is the tax deductibility of interest. Another argument in
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favour of some debt in the capital structure involves shirking, perquisites and bad investments (these are called
agency costs of equity):

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Shirking can be illustrated via the example of an owner of an all equity company needing outside financing faced
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with the choice of selling equity or debt to outsiders. An owner will have less incentive to (continue to) work very
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hard, if she issues equity rather than debt, since some of the future benefits will then accrue to outsiders.

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Financial mobility and flexibility are the other considerations which influence world wide capital structure. It is

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generally argued that a group management and capital structure is needed to permit movement of funds around the

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group as quickly as possible. This requires the ability of being as mobile as possible, particularly within the 100 per
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cent owned part of the group. Firms generally have debt ratios well below 100%. There is a degree of consistency
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within industries. Debt ratios are low in high growth industries with uncertain cash-flows and less tangible assets.

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Debt ratios are much higher in mature industries with large, stable cash-flows.
There are a number of companies with essentially no debt at all. Companies with a significant ownership stake by
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1 family-the founding family, often have lower debt levels than their more highly leveraged counterparts in the same

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industry. This may be because the managers and major equity holders of these companies are less diversified than the
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managers and equity holders of similar, but levered firms, and are unwilling to accept the additional risk that significant

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leverage entails.
So, in conclusion, tax rates, the type of industry, the ownership pattern, personal tax rates on interest and dividends,
the degree of uncertainty of operating income, etc. all help explain how managers determine the optimal level of debt
in their capital structure.
Q. 5. What is counter trade? Discuss the various forms of counter trade. What are the pros & cons of
counter trade from firm’s point of view?
Ans. It is a collective term which is used to refer to various methods of linking two export transactions between
companies in different countries or, in some instances, between countries themselves. In a simple countertrade
arrangement the respective exporters and importers accept reciprocal delivery of goods in part or full settlement of
the value of their deliveries of goods. Few deals are that simple.

WWW.IGNOUASSIGNMENTS.IN 7
 In an ideal market countertrade would not arise and to many analysts it is an undesirable bilateralization of world
trade. It developed after the Second World War and has grown in sophistication since. Countertrade is now a worldwide
practice and since the early 1970's has emerged as a significant medium of world trade. Estimates vary but on
average suggest that countertrade today accounts for more than 20% of total world trade. Australian exporters have
in the past been reluctant to embrace countertrade as a method of doing business–in my opinion, all they have been
doing is denying themselves (in times like this) the opportunity to participate to the fullest extent in the opportunities
that exist in world markets.
Countertrade is more appropriately viewed as simply another financing technique designed to put dollars in your
bank whilst delivering the following general advantages to the trading parties involved:
(a) It gives access to markets for Australian companies that may otherwise be closed to them.
(b) It helps conserve foreign currency reserves of the importing country.
(c) It allows access to foreign markets without necessarily setting up marketing companies or programme.

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(d) It allows the importing country to export products for which markets might not otherwise exist.
Types of Countertrade: Countertrade is an umbrella term which has been adopted to encompass what is

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largely an adhoc or deal by deal arrangement. The various forms of reciprocal trade which fall within the countertrade

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umbrella include:

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(a) Barter: This involves the direct exchange of unrelated goods with in principle, no alternative means of

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payment.

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(b) Counter Purchase: This is the most common form of countertrade and involves two separate flows of

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goods usually done under two separate contracts. In a short-term agreement, the seller is committed to buy goods
from the importing country but this obligation will normally be assigned to a third party trader and the seller will neither
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handle nor see the outbound goods–only receive cash into its bank account. The value of the counter purchase goods

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is an agreed percentage of the price of the exported goods.
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(c) Buyback: An exporter of equipment agrees to take back products produced by that equipment as payment.
The buyback agreement specifies precise particulars as to the products to be bought and perhaps the markets in
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which they can be sold.

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(d) Offsets: The seller of defence, aerospace and sometimes other hi-tech products is required to undertake the

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local purchase of components, technology transfer, investment, training and sometimes straight counter purchase as

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a condition of the sale.

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Apart from these straight costs which I have referred to, the other unknown at the start of negotiations of any
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countertrade transaction are the quality and market price of the outbound goods. In essence you do not know what net

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return you will get from each shipment of outbound goods until you have been able to fully particularize them, run the
proposal past your proposed countertrade company, find out from it what contractual terms it will impose to take over

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those goods and what commission it will charge. Only then can you calculate the return to you less the various costs

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which I have referred to above and put a price on your inbound goods.
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Therefore, in my opinion, there is no substitute for experience and specific skills in this difficult area. If your

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company does not have an experienced counter–trade negotiator on its staff, then it should engage the services of a
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consultant for each particular deal. That consultant should be engaged as part of the team from the earliest possible time,
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as too should the lawyer. Many deals that involve counter trade do not ultimately come to fruition. It is much better,

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however, to identify the insurmountable problems in advance during the negotiation stage than to blindly enter into the
agreement and get caught with a significant trading loss or exposure.
Counter trade means reciprocal and compensatory trade agreements between the countries facing balance of
payment problems. It may take the form of counter purchase, barter offset, buyback and technology transfer. A
Comparative International Study has suggested that large firms in a number of developing countries, including India,
use much more external finance in general, and equity finance in particular, than those in developed countries.
However, the contrast is in part a product of methodological differences, and India is much less different from
countries, such as France and Italy. The results are not due merely to bias arising from the focus on the largest
companies, since the rest of the Indian corporate sector also issues large amounts of equity, via informal networks
rather than organized stock exchanges.
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