Advanced Search
MyIDEAS: Login to save this paper or follow this series

Promarket Reforms and Allocation of Capital in India

Contents:

Author Info

  • Desai, Sameeksha

    ()
    (University of Missouri Kansas City)

  • Eklund, Johan E.

    ()
    (Ratio Institute)

  • Högberg, Andreas

    ()
    (Jönköping International Business School)

Abstract

The government of India initiated pro-market reforms in the 1990s, after almost five decades of socialist planning. These and subsequent policy reforms are credited as the drivers of India’s radical economic transformation. Prior to reforms, private investment was strictly regulated and restricted to certain areas and sectors. There have since been numerous changes in sectors important for investment, which should lead to changes in outcomes of firm-level strategic decision making and investment behavior. By most estimates, India will continue to grow. The purpose of this paper is to investigate changes in investment behavior from the introduction of reforms to current conditions. Reforms changed several institutional frameworks for firm operations, allowing firms to pursue more competitive strategies. Given the importance of ownership in determining firm efficiency and access to capital, we examine the effect of ownership on the performance of Indian firms for the period 1991-2006. We also examine industry differences in capital allocation. We compute a measure of investment efficiency derived from the accelerator principle: Elasticity of capital with respect to output. We examine the effect of various ownership structures on investment behavior and the efficiently of capital allocation across different sectors of the economy. We find that the allocation of capital has been slow to respond to reforms, indicating similar pace of firm responses.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ratio.se/pdf/wp/sd_jee_ah_promarket.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Martin Korpi)
Download Restriction: no

Bibliographic Info

Paper provided by The Ratio Institute in its series Ratio Working Papers with number 146.

as in new window
Length: 19 pages
Date of creation: 18 Nov 2009
Date of revision:
Handle: RePEc:hhs:ratioi:0146

Contact details of provider:
Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
Fax: 08-441 59 29
Email:
Web page: http://www.ratio.se/
More information through EDIRC

Related research

Keywords: allocation of capital; India; institutional reforms; ownership;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gugler, Klaus & Yurtoglu, Burcin B., 2003. "Average q, marginal q, and the relation between ownership and performance," Economics Letters, Elsevier, vol. 78(3), pages 379-384, March.
  2. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
  3. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
  4. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
  5. Aghion, Philippe & Burgess, Robin & Redding, Stephen J & Zilibotti, Fabrizio, 2006. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," CEPR Discussion Papers 5492, C.E.P.R. Discussion Papers.
  6. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
  7. Chang, Tai Hsieh & Peter, J- Klenow, 2007. "Misallocation and manufacturing TFP in China and India," MPRA Paper 35084, University Library of Munich, Germany, revised 15 Jun 2007.
  8. Desai, Sameeksha & Eklund, Johan E., 2008. "Ownership, Economic Entrenchment and Allocation of Capital," Ratio Working Papers 120, The Ratio Institute.
  9. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  10. Ana M. Fernandes & Ariel Pakes, 2008. "Factor Utilization in Indian Manufacturing: A Look at the World Bank Investment Climate Surveys Data," NBER Working Papers 14178, National Bureau of Economic Research, Inc.
  11. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998. "Corporate Ownership Around the World," Harvard Institute of Economic Research Working Papers 1840, Harvard - Institute of Economic Research.
  12. Montek S. Ahluwalia, 2002. "Economic Reforms in India Since 1991: Has Gradualism Worked?," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 67-88, Summer.
  13. Cho, Myeong-Hyeon, 1998. "Ownership structure, investment, and the corporate value: an empirical analysis," Journal of Financial Economics, Elsevier, vol. 47(1), pages 103-121, January.
  14. Denis, Diane K. & McConnell, John J., 2003. "International Corporate Governance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 1-36, March.
  15. Arvind Subramanian & Raghuram Rajan & Ioannis Tokatlidis & Kalpana Kochhar & Utsav Kumar, 2006. "India's Pattern of Development," IMF Working Papers 06/22, International Monetary Fund.
  16. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  17. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September.
  18. Peter M. DeMarzo & Branko Uro, 2006. "Ownership Dynamics and Asset Pricing with a Large Shareholder," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 774-815, August.
  19. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
  20. Lawrence S�ez & Joy Yang, 2001. "The Deregulation of State-Owned Enterprises in India and China," Comparative Economic Studies, Palgrave Macmillan, vol. 43(3), pages 69-97, September.
  21. Kumbhakar, Subal C & Sarkar, Subrata, 2003. " Deregulation, Ownership, and Productivity Growth in the Banking Industry: Evidence from India," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 403-24, June.
  22. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 375-90, June.
  23. P.R. Shukla & Tirthankar Nag & Debashish Biswas, 2005. "Electricity reforms and firm level responses: changing ownership, fuel choices, and technology decisions," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 23(2/3), pages 260-279.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:ratioi:0146. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin Korpi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.