We formulate a simultaneous equations model and with the data of a panel of 600 Indian firms for the period 1991-92 to 1997-98 test the hypothesis of finance constraint. The firms are classified by the dividend pay-out ratio into high-cost and low-cost groups; a high dividend pay-out ratio...

This study analyses the role of fundamentals and financial factors in determining firm investment in India with imperfect capital market in a panel VAR framework. Previous research in this area is based on the test of significance (or some variant of this) of the cash flow variable in the...

We use the stochastic frontier approach to estimate the impact of firm characteristics on investment decisions of Indian firms during the 1997-2006 period. The use of the stochastic frontier approach allows us to define the (unobserved) optimum investment that is consistent with a firm's...