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Economic reforms, business groups and changing pattern of distribution of profitability across corporate firms in India: a semi-parametric analysis

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  • Indrani Chakraborty

Abstract

This article applies the semi-parametric method to analyse the effects of economic reforms and some other factors on changes in the distribution of profitability of corporate firms in India. Comparing the two post-reform years (1994 and 2010) with the pre-reform year (1990), we observe a rightward shift in the distribution of profitability implying an across-the board increases in profitability of all firms after reforms. Two factors that explain the change are changes in interaction between capital structure and business group-affiliation, and changes in other firm characteristics such as size, age, growth opportunities and market share, which played the major role in explaining the changes in distribution of profitability of firms measured in terms of Tobin's q as well as Return On Assets (ROA). Two firm characteristics, namely size and market share, played a major role in explaining the changes in distribution of profitability of firms measured in terms of ROA but not in terms of Tobin's q . Our most important finding is that, profitability has increased both in the business group-affiliated firms and the stand-alone firms. Thus, our findings infer that, encouraging business group-affiliation is not necessarily a remedy to improve firm performance in an emerging market like India.

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  • Indrani Chakraborty, 2013. "Economic reforms, business groups and changing pattern of distribution of profitability across corporate firms in India: a semi-parametric analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 23(7), pages 589-602, April.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:7:p:589-602
    DOI: 10.1080/09603107.2012.732687
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    Cited by:

    1. Indrani Chakraborty, 2020. "Debt financing and market concentration in an emerging economy: firm-level evidence from India," Economic Change and Restructuring, Springer, vol. 53(3), pages 451-474, August.
    2. Ujjayini Roy & Indrani Chakraborty, 2023. "Market concentration, agency cost and firm performance: a case study on Indian corporate firms," Economic Change and Restructuring, Springer, vol. 56(4), pages 2645-2693, August.
    3. Ujjayini Roy & Indrani Chakraborty, 2024. "Market concentration, promoter ownership and firm performance: evidence from Indian corporate firms," Indian Economic Review, Springer, vol. 59(1), pages 27-85, June.
    4. Sukhdeep Singh, 2024. "Investments in Innovations and Market Structure: A Semi-parametric Approach," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 25(1), pages 26-44, March.
    5. Sukhdeep Singh & Indrani Chakraborty, 2021. "Growth of the Firms and Investments in Innovations: An Empirical Investigation of the Indian Manufacturing Industry," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 87-122, March.

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