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Does business group affiliation matter for external debt finance? Evidence from India

Apalak Khatua ()
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Apalak Khatua: XLRI Xavier School of Management

Asian Business & Management, 2017, vol. 16, issue 4, 290-322

Abstract: Abstract We investigate in the Indian context how developing-economy business groups make capital structure choices during economic reforms. Using eighteen years of panel data, we find a general trend towards deleveraging, reduced access to deficit financing, and higher costs of debt financing for group-affiliated firms. We further find that the first two of these trends are more pronounced for firms affiliated with large business groups. Our findings contribute to resource-dependence theory by demonstrating that the size of business groups is positively related to their ability to better manage environmental interdependence and uncertainty during economic reforms.

Keywords: Business groups; Capital structure choices; Financial constraints; Costs of debt; Economic reforms; India (search for similar items in EconPapers)
Date: 2017
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