UID:
edocfu_9960178322702883
Format:
1 online resource (33 pages)
ISBN:
1-4843-0398-9
,
1-4843-0416-0
Series Statement:
IMF Working Papers
Content:
This paper studies private investment in India against the backdrop of a significant investment decline over the past decade. We analyze the potential causes of weaker investment at the firm level, using both firm-level financial statements and a novel dataset on firms’ investment project decisions, and find that financial frictions have played a role in the slowdown. Firms with higher financial leverage invest less, as do firms with lower earnings relative to their interest expenses. Consistent with the notion of credit constraints leading to pro-cyclical investment, we also find that firms with higher leverage are (i) less likely to undertake new investment projects, (ii) less likely to complete investment projects once begun, and (iii) undertake shorter-term investment projects.
Note:
Cover -- Contents -- I. Introduction -- II. Related Literature -- III. Data and Descriptive Statistics -- IV. Empirical Method -- V. Results and Discussion -- VI. Conclusions -- Figures -- 1. Gross Fixed Capital Formation -- 2. Corporates: Median Debt to Equity -- 3. Corporate Sector Vulnerabilities -- 4. Corporates: Average Investment for Highly Leveraged and Less Leveraged Firms -- 5. Investment Project Length -- Tables -- 1. Gross Capital Formation by Industry -- 2. Summary Statistics -- 3. New Project Announcements -- 4. Firm Investment - Benchmark Specification -- 5. Firm Investment - Exporters and External Demand -- 6. Firm Investment - Interaction with Financial Constraints -- 7. Firm Investment - Bank Dependence -- 8. Firm Investment - Interest Coverage Ratio -- 9. New Investment Projects -- 10. Investment Project Completion -- 11. Investment Project Length -- References.
Additional Edition:
ISBN 1-4843-0264-8
Language:
English
