Impact of financial and capital market reforms on corporate finance in India / Sayuri Shirai.

Format:

Book

Government document

Author/Creator:

Shirai, Sayuri.

Language:

English

Subjects (All):

Economic and Social Development.

India.

Local Subjects:

Economic and Social Development.

India.

Physical Description:

1 online resource (20 pages)

Contained In:

Asia-Pacific Development Journal Vol. 11, no. 2, p. 33-52 11:2<33 24119873

Place of Publication:

New York : United Nations, 2006.

System Details:

text file

Summary:

India's financial and capital market reforms since the early 1990s have had a positive impact on both the banking sector and capital markets. Nevertheless, the capital markets remain shallow, particularly when it comes to differentiating high-quality firms from low-quality ones (and thus lowering capital costs for the former compared with the latter). While some high-quality firms (e.g., large firms) have substituted bond finance for bank loans, this has not occurred to any significant degree for many other types of firms (e.g., old, export-oriented and commercial paper-issuing ones). This reflects the fact that most bonds are privately placed, exempting issuers from the stringent accounting and disclosure requirements necessary for public issues. As a result, banks remain major financiers for both high- and low-quality firms. The paper argues that India should build an infrastructure that will foster sound capital markets and strengthen banks' incentives for better risk management.

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