Corporate finance in developing countries: New evidence for India
Financing of corporate growth has generally not been paid much attention in the development economics literature. Recent analysis of the Emerging Markets Data Base of the International Financial Corporation suggests that corporate financing patterns in India, among a select group of other developing countries, are different from those in developed countries. Based on the data for a sample of the largest firms, these analyses provide evidence that Indian firms make more use of equity financing than firms in developed countries. These results have been used to argue in favour of investing heavily in the development of stock markets in developing firms. In this paper, we investigate the possibility that such an analysis could be too sample-specific in that the largest firms do not represent all of the Indian private corporate sector. Our analysis, based on sectoral and cumulative firm-level data for India, suggests that while firms do make a significant use of equity issues, the nature of equity financing may be different in an environment in which a number of firms are not listed on stock exchanges but may be issuing equity. The results show that bank loans and internal finance are more important sources of corporate financing. Sectoral and firm-level data from the United Kingdom are utilized o compare the behaviour of Indian firms with that of firms in developed countries, for which there is a rich literature on financing corporate growth. We conclude that India is not obviously very different from the low internal finance developed countries and that, since a large part of equity issues are by unlisted firms, the gains from the promotion of stock markets may be limited.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
- Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
- Mayer, Colin, 1988.
"New issues in corporate finance,"
European Economic Review,
Elsevier, vol. 32(5), pages 1167-1183, June.
- Mark L. Gertler, 1988.
"Financial Structure and Aggregate Economic Activity: An Overview,"
NBER Working Papers
2559, National Bureau of Economic Research, Inc.
- Gertler, Mark, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 559-88, August.
- Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
- Samuel, Cherian, 1996. "The stockmarket as a source of finance : a comparison of U.S. and Indian firms," Policy Research Working Paper Series 1592, The World Bank.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Jenkinson, T & Corbett, J, 1997. "How is Investment Financed? A Study of Germany, Japan, UK and US," Papers 16, American Institute for Contemporary German Studies-.
- Raghuram G. Rajan & Luigi Zingales, 1994.
"What Do We Know About Capital Structure? Some Evidence from International Data,"
NBER Working Papers
4875, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
- Colin Mayer, 1990. "Financial Systems, Corporate Finance, and Economic Development," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 307-332 National Bureau of Economic Research, Inc.
- V. Sundararajan, 1987. "The Debt-Equity Ratio of Firms and the Effectiveness of Interest Rate Policy: Analysis with a Dynamic Model of Saving, Investment, and Growth in Korea," IMF Staff Papers, Palgrave Macmillan, vol. 34(2), pages 260-310, June.
- Corbett, Jenny & Jenkinson, Tim, 1996. "The Financing of Industry, 1970-1989: An International Comparison," Journal of the Japanese and International Economies, Elsevier, vol. 10(1), pages 71-96, March.
- Cobham, David & Serre, Jean-Marin, 2000. "A Characterization of the French Financial System," Manchester School, University of Manchester, vol. 68(1), pages 44-67, January.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:26:y:1998:i:6:p:1033-1047. 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: (Shamier, Wendy)
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.