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Bank Concentration and Firm Investment: Empirical Evidence from India

Author

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  • Abubakr Saeed
  • Olusegun Vincent

Abstract

This paper investigates the impact of bank concentration on firm-level investment across firm groups classified according to size, investment destination, and debt maturity structure. Using data of 302 manufacturing firms for the period 2000-2009, we show that elevated financial constraints are associated with small and medium-size enterprises and firms that are dependent on short-term debt and exhibit high levels of sensitivity of investment to cash flow. Our empirical finding confirms that bank concentration exerts a positive impact on firms' financial constraints on investment. This effect is more pronounced for small firms and firms dependent on short-term debt. However, our results are indifferent to domestic versus foreign investing firm groups.

Suggested Citation

  • Abubakr Saeed & Olusegun Vincent, 2012. "Bank Concentration and Firm Investment: Empirical Evidence from India," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(3), pages 85-105, May.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:3:p:85-105
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    Citations

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    Cited by:

    1. Ahmet Faruk Aysan & Mustafa Disli & Koen Schoors, 2013. "Bank Competition and Outreach: Evidence from Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S5), pages 7-30, November.
    2. Feldmann, Horst, 2015. "Banking system concentration and unemployment in developing countries," Journal of Economics and Business, Elsevier, vol. 77(C), pages 60-78.
    3. Črnigoj, Matjaž & Verbič, Miroslav, 2014. "Financial constraints and corporate investments during the current financial and economic crisis: The credit crunch and investment decisions of Slovenian firms," Economic Systems, Elsevier, vol. 38(4), pages 502-517.
    4. Hueh-Chen Lin & Jiang-Chuan Huang & Chun-Fan You, 2022. "Bank Diversification and Financial Constraints on Firm Investment Decisions in a Bank-Based Financial System," Sustainability, MDPI, vol. 14(17), pages 1-19, September.
    5. Bahadır Ergün & Ömer Tuğsal Doruk, 2020. "Effect of financial constraints on the growth of family and nonfamily firms in Turkey," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-24, December.

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