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Firm Size and Saving Behaviour: A Study of Selected Indian Engineering Firms

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  • B. C. Purohit

    (National Institute of Public Finance and Policy)

Abstract

Empirical evidence regarding the firm size and corporate saving behaviour remains vague. However, the generally held notion is that small firms tend to save more. This study tries to test the validity of this hypothesis using micro firm level data drawn from balance sheets of 81 Indian engineering firms, over a period of 15 years. Our results point to the existence of interfirm variations in saving behaviour of firms having the same industrial belonging. Evidence based on average as well as marginal saving propensities indicates the medium and large companies to be the prime savers. This conclusion seems to be weakly valid within a further classification of group of medium and large companies only. These findings are corroborated by the long run marginal saving propensities and adjustment mechanisms-applying Linter formulation to data set of each individual sample firm. Our results are indicative of the role of existing capital market imperfections in shaping the corporate saving behaviour.

Suggested Citation

  • B. C. Purohit, 1988. "Firm Size and Saving Behaviour: A Study of Selected Indian Engineering Firms," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 23(1), pages 107-120, January.
    • Handle: RePEc:dse:indecr:v:23:y:1988:i:1:p:107-120
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