Determinants of Private Corporate Sector Investment in India

Jangili, Ramesh (2010): Determinants of Private Corporate Sector Investment in India. Published in: Reserve Bank of India Occasional Papers , Vol. 31, No. 3 (2010): pp. 67-89.

Abstract

This paper analyses the trends in corporate fi nance in India, and uses a panel data model for empirically identifying the factors which infl uence corporate investment decisions, during the period 2000-01 to 2008-09. The fi ndings revealed that fi rm level factors such as fi rm size, dividend payout ratio, effective cost of borrowing, cash fl ow ratio and growth in value of production are signifi cant in determining corporate investment decisions. At macro level, capital market developments and real effective exchange rate are signifi cant in infl uencing corporate investment decisions, whereas, infl ation and non-food credit growth are not signifi cant in predicting corporate investment decisions. The results of the study generally support existing literature on the impact of macroeconomic variables and certain fi rm level factors on corporate investment decisions. The main value of this paper is to consider broad based approach to analysing the determinants of corporate investment decisions from emerging market context.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate investment, Panel regression
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models

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