Professor Santanu K. Ganguli brings honour to IMT Ghaziabad at the Economics, Finance and International Business Research Conference in Miami, Florida, USA

Dr. Santanu K. Ganguli, Professor and Area Chair-Person of Finance at IMT Ghaziabad, is not just a passionate researcher on ‘Corporate Governance and Agency problems’, he literally breathes the subject. He was a practicing Chartered Accountant between 1989 and 2007. Professor Ganguli’s shift to the academic domain was a result of his belief that he had a better chance of sensitizing and propagating the various governance issues aimed at treating all the stakeholders - particularly the fund providers - with equity and fairness.

“Ultimately, it is good corporate governance that leads to value creation and enhancement, because of the all-round trust that the corporates create in the society, during this process. Be it in the lecture rooms of a premier B-schools like IMT Ghaziabad, or at fora of national and international academic luminaries, I’m duty-bound to emphasise that corporate and fiscal legislation should not even indirectly come in the way of promoting good governance practices as well as mitigating agency problem of a corporation.”

Recently, in December 2011, as Professor of Finance at IMT Ghaziabad, he was invited to present a paper on ‘Tax and Dividend Distribution, Agency Problem and Firm Value – Unique Indian Perspective’ at the Economics, Finance and International Business Research Conference held in Miami, Florida, USA. Not only did his vision garner immense support from the organisers of the event – The Journal of American Academy of Business, Cambridge, USA – but it was widely appreciated by the gathering. In fact, Professor Santanu K. Ganguli made IMT Ghaziabad proud by being awarded the Best Presenter Award at this melting pot of intelligentsia.

“Currently, the corporate taxation policy in India has a peculiar problem of taxing the same wealth twice. A company pays taxes on its profits. After this tax has been deducted, when it is distributed as dividends to its shareholders, the shareholders are again required to pay income tax on the dividend. While taxation on Wealth Creation is understandable, retaxing the same wealth after it has been distributed is objectionable. It is not good law; it is bad law,” says an impassioned Professor Ganguli.

Since Professor Ganguli has always been immersed in the subject, it took him just 3 months – while doing full justice to his teaching commitments at IMT Ghaziabad - to come up with this award-winning presentation. More than 80 papers were presented from across the globe at this gathering of Economics and Finance stalwarts in Miami.

“Corporate houses should not hold too much cash, as it leads to many malpractices. The real owners are the shareholders, and the managers are the custodians of the company. Therefore, cash should be distributed by way of dividends. Owing to taxation of dividends in India, managers have the escape route of not paying dividends at all. They tell shareholders that the wealth created by the company will see a further reduction in case of dividend payment. The centre-point of my paper presented at Miami was pegged on this very assumption that if the distribution of dividend invites tax liability, then the shareholders should dislike dividends. Strangely enough, that is not the case in India. I have proven empirically through the use of statistical tools that after the declaration of dividend, the prices of shares actually go up. And therefore, despite a flawed taxation policy, shareholders like dividends!”

In the late 1990’s, while still in practise as a Chartered Accountant, Professor Ganguli had started writing articles on accounting and taxation in the Hindu Business Line, but his appetite for teaching was whetted when he began teaching as a visiting faculty at IIM Calcutta in 2001. He t joined IMT Nagpur in 2007 as full time faculty and - but for a short stint with IFIM Business School, Bangalore for about 8 months - has been with the IMTs ever since. Now, more than 3 years into his stint with IMT Ghaziabad, Professor Ganguli is happy with the backing of the IMT Ghaziabad management in giving him the freedom to carry out his research work… even if it sometimes ruffles a few corporate feathers.

“The next paper that I intend producing at IMT Ghaziabad - and submitting again at an international forum - will revolve around the question of why corporate houses in India are amassing such obscene amount of cash. Now that I’ve empirically proven that shareholders like dividends, despite the flawed taxation policy, it is a natural progression of thought. One wonders why companies like Infosys are not distributing their huge stockpile of wealth among their shareholders.”

Professor Santanu K. Ganguli of IMT Ghaziabad is clearly set to ask a few uncomfortable questions of Indian corporate houses. Since he always backs his research with empirical evidence, corporate bigwigs will find it hard to ignore his findings, especially with his credentials as an internationally acclaimed voice in the field of Finance.