Essays on financing frictions and demand for external finance

Guide(s)

Jayadev, M

Department

Finance and Accounting

Area

Finance and Accounting

University

Indian Institute of Management Bangalore

Place

Bangalore

Publication Date

3-31-2021

Year Awarded

March 2021

Year Completed

March 2021

Year Registered

June 2016

Abstract

In this dissertation, we look at three broad aspects for the Indian firms. First, we analyse the financing behaviour of the financially constrained and unconstrained non-financial firms in the Indian context. We find that, given the profitability, the financially constrained firms show more complementarity behaviour as compared to the unconstrained firms. Second, we analyse how SARFAESI Act affects the demand of debt financing for Indian non-financial firms. Results suggest that as loan recovery became more easy, demand for debt increased. But this increase in demand did not lead to investment but led to precautionary savings. Third, we document what factors drive the choice of debt for the Indian firms. Apart from these three studies related to the Indian firms, the dissertation also looks how the country-specific factors (governance/institutional factors, financial market development factors and macroeconomic factors) affect the demand of firm’s debt financing through a cross-country study. In the first essay, we analyse the interplay between the available internal funds and the demand for external finance, for firms in India, which face financing frictions (or credit market frictions). While increase in creditor rights protection affects the supply side of external finance, the essay looks at the demand side of such external finance, particularly, in the presence of financing frictions. This essay intends to augment the work of Almeida and Campello (2010) in India (an emerging market) employing various measures to segregate firms which face high and low financing frictions. Results suggest that there is a more positive (more complementarity) relationship between the internal funds and demand for external finance for financially constrained firms, as compared to the financially unconstrained firms. In our opinion, the findings have key impact on issues like development of bond and equity markets in India, rethinking loan strategies by banks and the regulatory measures to be taken by regulators.

Pagination

229p.

Copyright

Indian Institute of Management Bangalore

Document Type

Dissertation

DAC Chairperson

Jayadev, M

DAC Members

Subramanian, Chetan; Anand, Abhinav

Type of Degree

Ph.D.

Relation

DIS-IIMB-FPM-P21-16

This document is currently not available here.

Share

COinS