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Debt financing and market concentration in an emerging economy: firm-level evidence from India

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  • Indrani Chakraborty

    (Institute of Development Studies Kolkata)

Abstract

This study has empirically tested the relation between leverage and market concentration using a balanced panel data on 1469 firms over 26 manufacturing industries during 2001–2016 in the context of India. Our regression results indicate that competition has an overall negative effect on leverage. The negative effect of competition on leverage is intensified with larger firm size and larger growth opportunities. Finally, we examine whether the relationship between leverage and competition is non-monotonic. Our results show no important departure from linearity while using HHI but support the cubic relationship while using Tobin’s q. Different tests of robustness support our results.

Suggested Citation

  • Indrani Chakraborty, 2020. "Debt financing and market concentration in an emerging economy: firm-level evidence from India," Economic Change and Restructuring, Springer, vol. 53(3), pages 451-474, August.
    • Handle: RePEc:kap:ecopln:v:53:y:2020:i:3:d:10.1007_s10644-019-09256-6
    DOI: 10.1007/s10644-019-09256-6
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    More about this item

    Keywords

    Leverage; Product market competition; Dynamic panel regression; Semi-parametric regression; Deep purse model; Investment effect model; India;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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