Firm Financing in India : Recent Trends and Patterns
Using balance sheet information for nearly 6,000 firms between 1994-2003, this study investigates recent firm financing patterns in India. The paper documents the overall use of debt and, in particular, the role of bank financing (short-term and long-term), trade credit, intrabusiness group borrowin...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/01/5586703/firm-financing-india-recent-trends-patterns-firm-financing-india-recent-trends-factors http://hdl.handle.net/10986/8960 |
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okr-10986-89602021-04-23T14:02:42Z Firm Financing in India : Recent Trends and Patterns Martinez Peria, Maria Soledad Love, Inessa ASSET RATIO BALANCE SHEET BOOK VALUE BORROWING CAPITAL STRUCTURE CASH FLOWS COLLATERAL COMMERCIAL BORROWING COMPANY CORPORATIONS DEBT DEBT REPAYMENT DEVELOPMENT BANKS DIVIDENDS EXPANSION EXTERNAL FINANCING FINANCIAL INDUSTRY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL SECTOR FINANCING SOURCES FIRM SIZE FIRMS FIXED ASSETS FIXED COSTS GOVERNMENT FINANCE INDEBTEDNESS INSURANCE INSURANCE COMPANIES INTEREST COVERAGE RATIO INTEREST PAYMENT INTEREST PAYMENTS LIFE INSURANCE MEDIUM ENTERPRISES MUNICIPAL GOVERNMENTS NET WORTH PROFITABILITY PUBLIC DEBT RETAINED EARNINGS RETIREMENT RETURN ON ASSETS SMALL FIRMS SUBSIDIARIES SUPPLIERS Using balance sheet information for nearly 6,000 firms between 1994-2003, this study investigates recent firm financing patterns in India. The paper documents the overall use of debt and, in particular, the role of bank financing (short-term and long-term), trade credit, intrabusiness group borrowing and foreign financing. The study examines financing patterns over time and explores differences across firms by sector, age, ownership type, export orientation, and, in particular, size. In terms of trends, we find that while debt to asset ratios have been relatively stable, nominal debt growth has slowed down in recent years. At the same time, firms' repayment capacity, as measured by the interest coverage ratio has exhibited a U-shaped pattern falling during 1997-99 and recovering in recent years. Throughout the period of study, bank financing as a share of total debt has increased, while borrowing from non-bank financial institutions fell sharply. In terms of differences across firms, the most robust finding is that debt levels increase with firm size. Smaller firms have especially less debt relative to larger firms if they are young (below 10 years since incorporation), if they are in the manufacturing sector, and if they are located in Southern India. Furthermore, while the ratio of debt to assets has been relatively stable for large firms, we observe a significant decline for smaller firms. Overall, the findings presented in the paper provide suggestive (but not definite) evidence of stronger credit constraints for smaller firms. 2012-06-25T18:24:43Z 2012-06-25T18:24:43Z 2005-01 http://documents.worldbank.org/curated/en/2005/01/5586703/firm-financing-india-recent-trends-patterns-firm-financing-india-recent-trends-factors http://hdl.handle.net/10986/8960 English en_US Policy Research Working Paper; No. 3476 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ASSET RATIO BALANCE SHEET BOOK VALUE BORROWING CAPITAL STRUCTURE CASH FLOWS COLLATERAL COMMERCIAL BORROWING COMPANY CORPORATIONS DEBT DEBT REPAYMENT DEVELOPMENT BANKS DIVIDENDS EXPANSION EXTERNAL FINANCING FINANCIAL INDUSTRY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL SECTOR FINANCING SOURCES FIRM SIZE FIRMS FIXED ASSETS FIXED COSTS GOVERNMENT FINANCE INDEBTEDNESS INSURANCE INSURANCE COMPANIES INTEREST COVERAGE RATIO INTEREST PAYMENT INTEREST PAYMENTS LIFE INSURANCE MEDIUM ENTERPRISES MUNICIPAL GOVERNMENTS NET WORTH PROFITABILITY PUBLIC DEBT RETAINED EARNINGS RETIREMENT RETURN ON ASSETS SMALL FIRMS SUBSIDIARIES SUPPLIERS |
| spellingShingle |
ASSET RATIO BALANCE SHEET BOOK VALUE BORROWING CAPITAL STRUCTURE CASH FLOWS COLLATERAL COMMERCIAL BORROWING COMPANY CORPORATIONS DEBT DEBT REPAYMENT DEVELOPMENT BANKS DIVIDENDS EXPANSION EXTERNAL FINANCING FINANCIAL INDUSTRY FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL SECTOR FINANCING SOURCES FIRM SIZE FIRMS FIXED ASSETS FIXED COSTS GOVERNMENT FINANCE INDEBTEDNESS INSURANCE INSURANCE COMPANIES INTEREST COVERAGE RATIO INTEREST PAYMENT INTEREST PAYMENTS LIFE INSURANCE MEDIUM ENTERPRISES MUNICIPAL GOVERNMENTS NET WORTH PROFITABILITY PUBLIC DEBT RETAINED EARNINGS RETIREMENT RETURN ON ASSETS SMALL FIRMS SUBSIDIARIES SUPPLIERS Martinez Peria, Maria Soledad Love, Inessa Firm Financing in India : Recent Trends and Patterns |
| relation |
Policy Research Working Paper; No. 3476 |
| description |
Using balance sheet information for nearly 6,000 firms between 1994-2003, this study investigates recent firm financing patterns in India. The paper documents the overall use of debt and, in particular, the role of bank financing (short-term and long-term), trade credit, intrabusiness group borrowing and foreign financing. The study examines financing patterns over time and explores differences across firms by sector, age, ownership type, export orientation, and, in particular, size. In terms of trends, we find that while debt to asset ratios have been relatively stable, nominal debt growth has slowed down in recent years. At the same time, firms' repayment capacity, as measured by the interest coverage ratio has exhibited a U-shaped pattern falling during 1997-99 and recovering in recent years. Throughout the period of study, bank financing as a share of total debt has increased, while borrowing from non-bank financial institutions fell sharply. In terms of differences across firms, the most robust finding is that debt levels increase with firm size. Smaller firms have especially less debt relative to larger firms if they are young (below 10 years since incorporation), if they are in the manufacturing sector, and if they are located in Southern India. Furthermore, while the ratio of debt to assets has been relatively stable for large firms, we observe a significant decline for smaller firms. Overall, the findings presented in the paper provide suggestive (but not definite) evidence of stronger credit constraints for smaller firms. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Martinez Peria, Maria Soledad Love, Inessa |
| author_facet |
Martinez Peria, Maria Soledad Love, Inessa |
| author_sort |
Martinez Peria, Maria Soledad |
| title |
Firm Financing in India : Recent Trends and Patterns |
| title_short |
Firm Financing in India : Recent Trends and Patterns |
| title_full |
Firm Financing in India : Recent Trends and Patterns |
| title_fullStr |
Firm Financing in India : Recent Trends and Patterns |
| title_full_unstemmed |
Firm Financing in India : Recent Trends and Patterns |
| title_sort |
firm financing in india : recent trends and patterns |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2005/01/5586703/firm-financing-india-recent-trends-patterns-firm-financing-india-recent-trends-factors http://hdl.handle.net/10986/8960 |
| _version_ |
1764406875125710848 |