The purpose of this paper is to study the efficiency of capital allocation, across levels of ownership, in the aftermath of pro‐market reforms in India.
The paper measures investment efficiency using the accelerator principle and examines the effect of ownership type on capital allocation.
No significant improvement in capital allocation during the period studied is found. The findings suggest firms face significant costs in adjusting their capital stock.
The paper uses unique data to estimate the elasticity of capital with respect to output.
Desai, S., Eklund, J. and Högberg, A. (2011), "Pro‐market reforms and allocation of capital in India", Journal of Financial Economic Policy, Vol. 3 No. 2, pp. 123-139. https://doi.org/10.1108/17576381111133606
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