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Ownership, evergreening and crisis: an analysis of bank–firm relationships in India

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  • Saibal Ghosh

Abstract

Employing data on publicly listed firms for 1995–2012, the article examines the behaviour of bank lending and interest cost and how it evolved during the crisis. The evidence suggests that high-Non-performing Loans (NPL) main banks raised their lending and lowered lending rates during the crisis, especially to risky, low-profit firms, indicative of a flight from quality. A disaggregation of the possible reasons for the flight from quality provides evidence in favour of short-termism behaviour by banks. The analysis also provides evidence in support of tunnelling by risky firms, which became amplified during the crisis. The net effect of these developments was a perceptible reduction in overall employment.

Suggested Citation

  • Saibal Ghosh, 2018. "Ownership, evergreening and crisis: an analysis of bank–firm relationships in India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 11(2), pages 169-194, May.
    • Handle: RePEc:taf:macfem:v:11:y:2018:i:2:p:169-194
    DOI: 10.1080/17520843.2017.1313753
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    Cited by:

    1. Ghosh, Saibal, 2018. "Bad luck, Bad policy or Bad banking? Understanding the financial management behavior of MENA banks," Journal of Multinational Financial Management, Elsevier, vol. 47, pages 110-128.

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