The debt wish: Rent seeking by business groups and the structure of corporate borrowing in India
AbstractBusiness groups play an important role in emerging economies. The transactions cost perspective, which has dominated our understanding of such groups, argues that the emergence of business groups is a natural response to market failures in developing countries. In this paper, we propose an alternate theoretical perspective – the rent-seeking view – that takes these groups as engaging in coordinated lobbying for the capture of rents created by governments. We develop and implement an empirical strategy to test for the rent-seeking view drawing from the property rights theory of corporate finance. We find strong empirical support for the rent-seeking view using a large cross-sectional data-set of firms in India. Copyright Springer Science + Business Media B.V. 2007
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Bibliographic InfoArticle provided by Springer in its journal Public Choice.
Volume (Year): 130 (2007)
Issue (Month): 1 (January)
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Web page: http://www.springerlink.com/link.asp?id=100332
Business groups; Rent-seeking; Transactions cost; Indian industry;
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