Financing Firms in India

By Franklin Allen, R. Chakrabarti, Sankar De, J. Qian, Meijun Qian. 2006

328 citations recorded by the source corpus.

The authors examine the legal and business environments, financing channels, and governance mechanisms of various types of firms in India and compare them to those from other countries. Despite its English commonlaw origin, strong legal protection provided by the law, and a democratic government, corruption within India's legal system and government significantly weakens investor protection in practice. External financing of firms has been dominated by nonmarket sources of financing, while the characteristics of listed firms are similar to those from countries with weak investor protection. The evidence, including results based on a survey of small and medium-scale private firms, shows that alternative financing channels provide the most important source of funds. The authors also find that informal governance mechanisms, such as those based on reputation, trust, and relationships are more important than formal mechanisms (such as courts) in resolving disputes, overcoming corruption, and supporting growth.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8b6178e09905ef208aafc53a1db156e89eaa63f9

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Citations in the corpus

Where Is Credit Due? Legal Institutions, Connections, and the Efficiency of Bank Lending in Vietnam (2009, background): “In this sense, our results are consistent with a portion of the Allen et al. (2005, 2007) argument: as in China and India, much of the financing of the most dynamic and fastest growing business activity in the Vietnamese economy takes place outside the traditional banking sector.”
Public Trust, the Law, and Financial Investment (2009, background): “Allen, Chakrabarti, De, Qian, and Qian (2006) find that despite having a legal system with low”
Financing constraints and investments in R&D: Evidence from Indian manufacturing firms (2015, neutral): “Perhaps these contradicting results may be due to the fact that Indian financial system is predominantly bank based (Allen et al 2012) and firms do keep a high leverage level compared to their counterparts in US.”
Domestic structures, foreign economic policies and global economic order: Implications from the rise of large emerging economies (2015, neutral): “Family ownership can be counted among the distinguishing features of Indian multinational corporations (Allen et al., 2012).”
Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs (2014, background): “Reflecting the risks attached to smaller firms and the lack of access to traditional lending more generally, Allen et al. (2005; 2012) show that non-state, non-listed firms in China and India rely more on alternative financing channels such as funds from family and friends in order to finance…”
Firm growth and barriers to growth among small firms in India (2012, background): “For further indicators of economic development in India, such as gross domestic product (GDP), life expectancy, literacy rates, inequality, and the structure of Indian industry (shares of agriculture, industry and services), the reader is referred to Allen et al. (2006) .”
Do Debt Contract Enforcement Costs Affect Financing and Asset Structure (2014, neutral): “Empirical papers that have looked at the role of creditor protection include Petersen and Rajan (1997), Fisman and Love (2003), and Allen et al. (2012). These studies motivate some of our tests, the main difference being our”
Financing energy efficiency : lessons from Brazil, China, India, and beyond (2008, neutral): “See Allen et al. (2006).”
Corruption, growth, and governance: Private vs. state-owned firms in Vietnam (2012, neutral): “The R2 values in Table 2 lie between 0.08 and 0.12 and are comparable to those reported by other studies on firm-level economic growth (e.g., Allen et al., 2007; Ayyagari et al., 2010).”