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Investment Behavior in Post-Crisis Period ? Comparison of Indian Publics and Private Firms

Author

Listed:
  • Pankaj Kumar Gupta

    (Centre for Management Studies, JMI University)

  • Jasjit Bhatia

    (Centre for Management Studies, JMI University)

Abstract

Corporate investment in capital assets plays an important role in the total capital investment in the country particularly in the developing nations like India. The policy emphasis on corporate investment in India has undergone a major change in the last decade in line with the liberalization move. Also, the optimal investment strategy is crucial for business enterprise with the growing turbulence in the economies more importantly after the global financial crisis. Optimal allocation of capital to the right investment projects is of paramount importance to the firm and economy. We are, therefore, motivated to analyze the factors that influence the investment behavior of firms in India and comparison between the public and private firms. We choose a period of 2007-2013 reflecting the after effects of the global financial crisis. The investment behavior has been analyzed with along with the selected variables reflecting cash flow movements, dividend distribution, and firm?s size and leverage aspect of financing total assets using a panel regression methodology considering both fixed and random effects models. We find that in case of private firms, the investment behavior is significant influenced by the firm size leaving the dividend payout, cash flows and leverages. However, investment by public firms is more affected by government policies rather than their own financial variables. We find that this behavior has significantly contributed to the robustness of the economic conditions after the crisis.

Suggested Citation

  • 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.
    • Handle: RePEc:sek:iefpro:0401660
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    References listed on IDEAS

    as
    1. Jangili, Ramesh, 2010. "Determinants of Private Corporate Sector Investment in India," MPRA Paper 39834, University Library of Munich, Germany.
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    3. Aggarwal, Raj & Zong, Sijing, 2006. "The cash flow-investment relationship: International evidence of limited access to external finance," Journal of Multinational Financial Management, Elsevier, vol. 16(1), pages 89-104, February.
    4. Grzegorz Pawlina & Luc Renneboog, 2005. "Is Investment‐Cash Flow Sensitivity Caused by Agency Costs or Asymmetric Information? Evidence from the UK," European Financial Management, European Financial Management Association, vol. 11(4), pages 483-513, September.
    5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Investment Behavior; Leverage; Capital Structure Dividend Payout; Global Crisis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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