Motives behind equity holding by banks: Evidence from India

Mita Choudhury ()

Journal of Economics and Finance, 2006, vol. 30, issue 3, 406 pages

Abstract: This paper examines the motives behind equity holding by banks in non-financial firms. It has been argued that banks hold equity in firms primarily for two reasons: to support their debt holding or for returns as capital investments. This paper tries to examine which among these two motives drive equity holdings by Development Financial Institutions in India (DFIs). Results indicate that equity holding by DFIs in India is primarily driven by their interest as creditors. In poorly performing firms, equity holding by DFIs is also driven by debt restructuring in firms in the form of conversion of debt to equity. Copyright Academy of Economics and Finance 2006

Date: 2006
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DOI: 10.1007/BF02752743

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