“Outward
Orientation, Investment and Finance Constraints: A Study of Indian Firms”
Citation: Ganesh-Kumar, A., K. Sen and R.
Vaidya. 2001. “Outward Orientation, Investment and Finance Constraints: A Study
of Indian Firms”. Journal of Development Studies,
37(4), pp.133-149.
Abstract: We investigate the presence of
finance constraints on firms’ investment behaviour using Indian manufacturing
as a case-study. This question becomes particularly interesting in the
post-1991 period when substantial market oriented reforms were undertaken. We
argue that in the Indian institutional context (especially, the underdeveloped
state of bankruptcy laws and restrictive exit procedures) outward orientation
rather than size is the relevant criteria for distinguishing firms that may be
“finance-constrained” from those that are not. Using panel data for 718 Indian
manufacturing firms for the period 1993-1998, we find that exporting firms are
less constrained in financial markets than firms which sell primarily to
domestic markets.