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Outward Orientation, Investment and Finance Constraints: A Study of Indian Firms

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  • A. Ganesh-Kumar
  • K. Sen
  • R. Vaidya

Abstract

We investigate the presence of finance constraints on firms' investment behaviour using Indian manufacturing as a case study. This question becomes particularly interesting in the post-1991 period when substantial market oriented reforms were undertaken. We argue that in the Indian institutional context (especially, the underdeveloped state of bankruptcy laws and restrictive exit procedures) outward orientation rather than size is the relevant criteria for distinguishing firms that may be 'finance-constrained' from those that are not. Using panel data for 718 Indian manufacturing firms for the period 1993-98, we find that exporting firms are less constrained in financial markets than firms which sell primarily to domestic markets.

Suggested Citation

  • A. Ganesh-Kumar & K. Sen & R. Vaidya, 2001. "Outward Orientation, Investment and Finance Constraints: A Study of Indian Firms," Journal of Development Studies, Taylor & Francis Journals, vol. 37(4), pages 133-149.
    • Handle: RePEc:taf:jdevst:v:37:y:2001:i:4:p:133-149
    DOI: 10.1080/00220380412331322071
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