Business groups, financing constraints and investment: The case of India

R Lensink*, R Van der Molen, S Gangopadhyay

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

49 Citations (Scopus)

Abstract

We examine the effect of business group affiliation on corporate investment behaviour in India. More specifically, we test whether group affiliation reduces financing constraints for the affiliated firms. We use a data set containing 694 listed Indian companies for the 1989-97 period. We estimate a simple investment equation and find evidence that the investment-cash flow sensitivity is much lower for group affiliates. This suggests that business group affiliates have better access to external funds than stand-alone firms.

Original languageEnglish
Pages (from-to)93-119
Number of pages27
JournalJournal of Development Studies
Volume40
Issue number2
DOIs
Publication statusPublished - Dec-2003

Keywords

  • CORPORATE-INVESTMENT
  • INDUSTRIAL GROUPS
  • GOVERNANCE

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