Directed credit and investment in small-scale industry in India: evidence from firm-level data 1965-78

Eastwood, Robert and Kohli, Renu (1999) Directed credit and investment in small-scale industry in India: evidence from firm-level data 1965-78. Journal of Development Studies, 35 (4). pp. 42-63. ISSN 0022-0388

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Abstract

Panel data on 788 modern sector Indian firms during 1965-78 are used to analyse the link between the size of a firm and its financial environment. Exogeneity tests reveal that large firms with improved investment prospects could obtain external finance at the margin, but that small firms could not. The policy of directing bank credit accordingly relaxed a binding constraint on small firms, raising investment. Assuming that all of the rise in the credit-sales ratio in small firms was policy-induced then so was about one third of the 170 per cent rise during 1965-78 in their investment-sales ratio.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Depositing User: Robert Eastwood
Date Deposited: 06 Feb 2012 21:11
Last Modified: 29 Jun 2012 10:20
URI: http://sro.sussex.ac.uk/id/eprint/30033
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