Business groups, financing constraints, and investment : the case of India
We examine the effect of business group affiliation on corporate investment behavior in India. We use a data set containing 684 Indian listed companies for the 1989-1997 period. We estimate a simple investment equation and find evidence that cash flow has a positive effect on investment spending of stand-alone firms, whereas for group affiliates cash flow is either insignificant or has a much lower coefficient. This suggests that business group affiliates have better access to external funds than stand-alone firms.
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