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Determinants of Private Corporate Sector Investment in India

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  • Jangili, Ramesh

Abstract

This paper analyses the trends in corporate fi nance in India, and uses a panel data model for empirically identifying the factors which infl uence corporate investment decisions, during the period 2000-01 to 2008-09. The fi ndings revealed that fi rm level factors such as fi rm size, dividend payout ratio, effective cost of borrowing, cash fl ow ratio and growth in value of production are signifi cant in determining corporate investment decisions. At macro level, capital market developments and real effective exchange rate are signifi cant in infl uencing corporate investment decisions, whereas, infl ation and non-food credit growth are not signifi cant in predicting corporate investment decisions. The results of the study generally support existing literature on the impact of macroeconomic variables and certain fi rm level factors on corporate investment decisions. The main value of this paper is to consider broad based approach to analysing the determinants of corporate investment decisions from emerging market context.

Suggested Citation

  • Jangili, Ramesh, 2010. "Determinants of Private Corporate Sector Investment in India," MPRA Paper 39834, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39834
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    References listed on IDEAS

    as
    1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Denizer Cevdet A. & Iyigun Murat F. & Owen Ann, 2002. "Finance and Macroeconomic Volatility," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-32, October.
    4. Nucci, Francesco & Pozzolo, Alberto F., 2001. "Investment and the exchange rate: An analysis with firm-level panel data," European Economic Review, Elsevier, vol. 45(2), pages 259-283, February.
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    Cited by:

    1. Micheal Kofi Boachie & Martin Ruzima & Mustapha Immurana, 2020. "The Concurrent Effect of Financial Development and Trade Openness on Private Investment in India," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 190-220, December.
    2. Gaurav Gupta & Jitendra Mahakud, 2019. "Alternative measure of financial development and investment-cash flow sensitivity: evidence from an emerging economy," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-28, December.
    3. Pankaj Kumar Gupta & Jasjit Bhatia, 2014. "Investment Behavior in Post-Crisis Period ? Comparison of Indian Publics and Private Firms," Proceedings of Economics and Finance Conferences 0401660, International Institute of Social and Economic Sciences.
    4. Vincent CAUPIN & Stéphanie PAMIES-SUMNER, 2017. "The challenges of India‘s economic policy," Working Paper bda91b64-2f19-4f87-bd32-1, Agence française de développement.
    5. Yoshino, Naoyuki & Paramanik, Rajendra N & Gopakumar, K U & Taghizadeh-Hesary, Farhad & Revilla, Ma. Laarni & Seetha Ram, K E, 2020. "An Aggregate-Level Macro Model for the Indian Economy," ADBI Working Papers 1201, Asian Development Bank Institute.

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    More about this item

    Keywords

    Corporate investment; Panel regression;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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