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.
- INDUSTRIAL GROUPS