Financial Liberalisation and Corporate Capital Structure: Evidence from India

1 Pages Posted: 6 Sep 2011

See all articles by Kavita Goel

Kavita Goel

UniSA

Ron P. McIver

Centre for Applied Financial Studies (CAFS), University of South Australia - School of Commerce

Date Written: September 6, 2011

Abstract

This paper provides an examination of changes in the financing pattern of the Indian corporate sector following financial liberalization. This is based on an analysis of balance sheet information for 227 companies listed on the Mumbai Stock Exchange (BSE) and covers the period from 1990 to 2007. We present evidence of significant stock market development throughout the process of liberalization. This development is in terms of increased size, liquidity and diversity (i.e. industry composition and firm size). We argue that this reflects improvements in governance and transparency, as well strong economic growth. A result of liberalization and economic growth has been increased profitability for the Indian corporate sector. This has led to a decline in the relative importance of debt, particularly bank loans, as a form of finance for the Indian corporate sector.

Keywords: financial development, equity financing, monitoring and governance

JEL Classification: G32, G38

Suggested Citation

Goel, Kavita and McIver, Ronald P., Financial Liberalisation and Corporate Capital Structure: Evidence from India (September 6, 2011). Personal Finance & Investments (PF&I) 2011 Conference Paper. Available at SSRN: https://ssrn.com/abstract=1922942 or http://dx.doi.org/10.2139/ssrn.1922942

Kavita Goel (Contact Author)

UniSA ( email )

37-44 North Terrace
Adelaide SA 5000, South Australia 5001
Australia

Ronald P. McIver

Centre for Applied Financial Studies (CAFS), University of South Australia - School of Commerce ( email )

37-44 North Terrace
GPO Box 2471
Adelaide SA 5000
Australia

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