Financial Frictions, Underinvestment, and Investment Composition: Evidence from Indian Corporates
IMF Working Papers, June 8, 2017
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- Financial Frictions, Underinvestment, and Investment Composition: Evidence from Indian Corporates
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Bibliographic details
- Authors: Sonali Das, Volodymyr Tulin
- Published: June 8, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484302644.001
Summary and main findings
- The paper studies private investment in India against the backdrop of a significant investment decline over the past decade.
- Using firm-level financial statements and a novel dataset on firms’ investment project decisions, the authors find that financial frictions have played a role in the slowdown.
- Empirical findings:
- Firms with higher financial leverage invest less.
- Firms with lower earnings relative to their interest expenses invest less.
- Firms with higher leverage are:
- less likely to undertake new investment projects,
- less likely to complete investment projects once begun,
- and undertake shorter-term investment projects.
- These results are described as consistent with the notion of credit constraints leading to pro-cyclical investment.
Data, scope, and methodology
- Data sources:
- Firm-level financial statements.
- A novel dataset on firms’ investment project decisions.
- Coverage and document details:
- Pages: 32
- Volume: 2017
- Issue: 134
- Series: Working Paper No. 2017/134
- DOI: https://doi.org/10.5089/9781484302644.001
- Stock No: WPIEA2017134
- ISBN: 9781484302644
- ISSN: 1018-5941
Subject areas and keywords
- Subjects: Banking, Capital adequacy requirements, Economic theory, Exports, Financial frictions, Financial institutions, Financial regulation and supervision, International trade, National accounts, Private investment, Stocks
- Keywords: Capital adequacy requirements, Corporate Leverage, Exports, Financial frictions, financial leverage, firm, firm investment, Global, India, investment, investment decision, investment expenditure, investment project, investment rate, investment slowdown, Private investment, Project length, Stocks, WP
Publication and authorship
- By Sonali Das, Volodymyr Tulin
- Publication date: June 8, 2017
- Publication type: IMF Working Papers
Source: IMF Working Paper "Financial Frictions, Underinvestment, and Investment Composition: Evidence from Indian Corporates", Working Paper No. 2017/134.
Content in this bundle
- Financial Frictions, Underinvestment, and Investment Composition: Evidence from Indian Corporates