Financial Frictions, Underinvestment, and Investment Composition : Evidence from Indian Corporates / Sonali Das, Volodymyr Tulin.

Format:

Book

Government document

Author/Creator:

Das, Sonali.

Contributor:

Tulin, Volodymyr.

Series:

IMF Working Papers; Working Paper ; No. 2017/134

IMF Working Papers

Language:

English

Subjects (All):

Corporations--India--Finance.

Corporations.

Investments--India.

Investments.

Capital market--India.

Capital market.

Financial crises--Economic aspects--India.

Financial crises.

Industrial organization (Economic theory)--India.

Industrial organization (Economic theory).

Physical Description:

1 online resource (33 pages)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2017.

Summary:

This paper studies private investment in India against the backdrop of a significant investment decline over the past decade. We analyze the potential causes of weaker investment at the firm level, using both firm-level financial statements and a novel dataset on firms’ investment project decisions, and find that financial frictions have played a role in the slowdown. Firms with higher financial leverage invest less, as do firms with lower earnings relative to their interest expenses. Consistent with the notion of credit constraints leading to pro-cyclical investment, we also find that firms with higher leverage are (i) less likely to undertake new investment projects, (ii) less likely to complete investment projects once begun, and (iii) undertake shorter-term investment projects.

Contents:

Cover

Contents

I. Introduction

II. Related Literature

III. Data and Descriptive Statistics

IV. Empirical Method

V. Results and Discussion

VI. Conclusions

Figures

1. Gross Fixed Capital Formation

2. Corporates: Median Debt to Equity

3. Corporate Sector Vulnerabilities

4. Corporates: Average Investment for Highly Leveraged and Less Leveraged Firms

5. Investment Project Length

Tables

1. Gross Capital Formation by Industry

2. Summary Statistics

3. New Project Announcements

4. Firm Investment - Benchmark Specification

5. Firm Investment - Exporters and External Demand

6. Firm Investment - Interaction with Financial Constraints

7. Firm Investment - Bank Dependence

8. Firm Investment - Interest Coverage Ratio

9. New Investment Projects

10. Investment Project Completion

11. Investment Project Length

References.

Notes:

Includes bibliographical references.

Description based on publisher supplied metadata and other sources.

Description based on print version record.

ISBN:

9781484303986

1484303989

9781484304167

1484304160

OCLC:

993123033