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Outward Orientation, Investment and Finance Constraints: A Study of Indian Firms

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  • A. Ganesh-Kumar
  • K. Sen
  • R. Vaidya

Abstract

We investigate the presence of finance constraints on firms' investment behaviour using Indian manufacturing as a case study. This question becomes particularly interesting in the post-1991 period when substantial market oriented reforms were undertaken. We argue that in the Indian institutional context (especially, the underdeveloped state of bankruptcy laws and restrictive exit procedures) outward orientation rather than size is the relevant criteria for distinguishing firms that may be 'finance-constrained' from those that are not. Using panel data for 718 Indian manufacturing firms for the period 1993-98, we find that exporting firms are less constrained in financial markets than firms which sell primarily to domestic markets.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 37 (2001)
Issue (Month): 4 ()
Pages: 133-149

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Handle: RePEc:taf:jdevst:v:37:y:2001:i:4:p:133-149

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Related research

Keywords: Investment; Finance; Outward Orientation; Firms; Financial Markets; Manufacturing; India;

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Cited by:
  1. Chan, Rosanna, 2014. "Financial constraints, working capital and the dynamic behavior of the firm," Policy Research Working Paper Series 6797, The World Bank.
  2. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2008. "Financial constraints as a barrier to export participation," Documents de Travail de l'OFCE 2008-29, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Bhattacharyya, Surajit, 2008. "Determinants of Corporate Investment: Post Liberalization Panel Data Evidence from Indian Firms," MPRA Paper 6702, University Library of Munich, Germany.
  4. Sumon Bhaumik & Pranab Kumar Das & Subal C. Kumbhakar, 2011. "Firm Investment & Credit Constraints in India, 1997 – 2006: A stochastic frontier approach," William Davidson Institute Working Papers Series wp1010, William Davidson Institute at the University of Michigan.
  5. Gautam, Vikash, 2011. "Evidence on the dynamics of investment-cash flow sensitivity," MPRA Paper 35431, University Library of Munich, Germany, revised Dec 2011.
  6. Sandra M. Leitner & Robert Stehrer, 2013. "Access to finance and funding composition during the crisis: A firm-level analysis of Latin American countries," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 50(1), pages 1-47, May.
  7. repec:spo:wpecon:info:hdl:2441/9948 is not listed on IDEAS
  8. repec:spo:wpecon:info:hdl:2441/6866 is not listed on IDEAS
  9. Das, Pranab Kumar, 2008. "Fundamentals, financial factors and firm investment in India: A Panel VAR approach," MPRA Paper 41612, University Library of Munich, Germany.
  10. Arnab Bhattacharjee & Sumit K. Majumdar, 2011. "How much does industry matter in an emerging market economy?," Dundee Discussion Papers in Economics 256, Economic Studies, University of Dundee.
  11. Espanol, Paula, 2006. "Why exporters can be financially constrained in a recently liberalised economy? A puzzle based on Argentinean firms during the 1990s," Proceedings of the German Development Economics Conference, Berlin 2006 7, Verein für Socialpolitik, Research Committee Development Economics.

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