Financing Firms in India
University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)
Indian School of Business
Boston College - Finance Department; University of Pennsylvania - Wharton Financial Institutions Center; China Academy of Financial Research (CAFR)
National University of Singapore
April 11, 2009
EFA 2006 Zurich Meetings
With extensive cross-country datasets and India firm samples, as well as our own surveys of small and medium firms, we examine the legal and business environments, financing channels, and growth patterns of different types of firms in India. Despite the English common-law origin and a British-style judicial system, Indian firms face weak investor protection in practice and poor institutions characterized by corruption and inefficiency. Alternative finance, including financing from all non-bank, non-market sources, and generally backed by non-legal mechanisms, constitutes the most important form of external finance. Bank loans provide the second most important external financing source. Firms with access to bank or market finance are not associated with higher growth rates. Our results indicate that bank and market finance is not superior to alternative finance in fast-growing economies such as India.
Number of Pages in PDF File: 63
Keywords: India, banks, markets, alternative finance, growth
JEL Classification: O5, K0, G0working papers series
Date posted: June 30, 2006 ; Last revised: December 5, 2011
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