Corporate choice for overseas borrowings: The Indian evidence
This paper examines the macroeconomic factors that drive the Indian corporates’ preference for overseas borrowings. Foreign borrowings by Indian corporates are characterised by a large number of companies accessing international capital markets for small size loans. The policy framework on foreign commercial borrowings has been effective in achieving a balanced maturity profile as also in channelising funds to productive sectors. It is observed that foreign borrowings by the corporates and import of capital goods display a close positive relationship. Since capital goods import is closely related to growth in industrial production, it implies that the demand for foreign borrowings by the corporates is generated by the underlying pace of real activity. The estimated error correction model revealed that Indian corporates’ long-run demand for overseas commercial borrowings is predominantly influenced by the pace of domestic real activity, followed by the interest rate differentials between the domestic and international markets (indicating arbitrage) and the credit conditions. The real variable dominates the price variable in driving the demand for overseas commercial borrowings.
|Date of creation:||2007|
|Date of revision:|
|Publication status:||Published in Reserve Bank of India Occasional Papers 3.28(2007): pp. 1-33|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Shahrokh M Saudagaran, 1988. "An Empirical Study of Selected Factors Influencing the Decision to List on Foreign Stock Exchanges," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 101-127, March.
- Sergio L. Schmukler & Esteban Vesperoni, 2001.
"Globalization and Firms' Financing Choices; Evidence From Emerging Economies,"
IMF Working Papers
01/95, International Monetary Fund.
- Sergio Schmukler & Esteban Vesperoni, 2001. "Globalization and Firms' Financing Choices: Evidence from Emerging Economies," William Davidson Institute Working Papers Series 388, William Davidson Institute at the University of Michigan.
- Schmukler, Sergio & Versperoni, Esteban, 2000. "Globalization and firms'financing choices - evidence from emerging economies," Policy Research Working Paper Series 2323, The World Bank.
- Mohanty, Jaya & Singh, Bhupal & Jain, Rajeev, 2003. "Business cycles and leading indicators of industrial activity in India," MPRA Paper 12149, University Library of Munich, Germany.
- Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:13220. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.