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Pro-market reforms and allocation of capital in India

  • Sameeksha Desai
  • Johan Eklund
  • Andreas Högberg

Purpose – The purpose of this paper is to study the efficiency of capital allocation, across levels of ownership, in the aftermath of pro-market reforms in India. Design/methodology/approach – The paper measures investment efficiency using the accelerator principle and examines the effect of ownership type on capital allocation. Findings – No significant improvement in capital allocation during the period studied is found. The findings suggest firms face significant costs in adjusting their capital stock. Originality/value – The paper uses unique data to estimate the elasticity of capital with respect to output. JEL classification: E22, E23, G18, G20, E44, L50

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Article provided by Emerald Group Publishing in its journal Journal of Financial Economic Policy.

Volume (Year): 3 (2011)
Issue (Month): 2 (July)
Pages: 123-139

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Handle: RePEc:eme:jfeppp:v:3:y:2011:i:2:p:123-139
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  1. 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.
  2. Johan E. Eklund & Sameeksha Desai, 2008. "Ownership, Economic Entrenchment and Allocation of Capital," Jena Economic Research Papers 2008-012, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
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  13. 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.
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  16. 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.
  17. 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.
  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.
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  22. 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.
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