Financing Firms in India

67 Pages Posted: 20 Apr 2016

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Rajesh Chakrabarti

O. P. Jindal Global University

Sankar De

Independent

Jun "QJ" Qian

Fanhai International School of Finance, Fudan University

Meijun Qian

Zhejiang University International Business School

Multiple version iconThere are 3 versions of this paper

Date Written: August 1, 2006

Abstract

The authors examine the legal and business environments, financing channels, and governance mechanisms of various types of firms in India and compare them to those from other countries. Despite its English commonlaw origin, strong legal protection provided by the law, and a democratic government, corruption within India's legal system and government significantly weakens investor protection in practice. External financing of firms has been dominated by nonmarket sources of financing, while the characteristics of listed firms are similar to those from countries with weak investor protection. The evidence, including results based on a survey of small and medium-scale private firms, shows that alternative financing channels provide the most important source of funds. The authors also find that informal governance mechanisms, such as those based on reputation, trust, and relationships are more important than formal mechanisms (such as courts) in resolving disputes, overcoming corruption, and supporting growth.

Keywords: Banks & Banking Reform, Corporate Law, Financial Intermediation, Governance Indicators, Small Scale Enterprise

Suggested Citation

Allen, Franklin and Chakrabarti, Rajesh and De, Sankar and Qian, Jun and Qian, Meijun, Financing Firms in India (August 1, 2006). World Bank Policy Research Working Paper No. 3975, Available at SSRN: https://ssrn.com/abstract=923282

Franklin Allen (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Rajesh Chakrabarti

O. P. Jindal Global University ( email )

Sonepat Narela road
Sonepat
Sonepat, Haryana 131001
India

Sankar De

Independent ( email )

Villa 286 bTR
Srisalam Highway
Hyderabad, Telengana
+91 7042662505 (Phone)

Jun Qian

Fanhai International School of Finance, Fudan University ( email )

Shanghai
China
86-21-63895501 (Phone)
86-21-62934572 (Fax)

HOME PAGE: http://www.fisf.fudan.edu.cn/show-65-69.html

Meijun Qian

Zhejiang University International Business School ( email )

718 Haizhou East Road, Xiashi
ZIBS building
Haining
China

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