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Pro‐market reforms and allocation of capital in India

Sameeksha Desai (Indiana University, Bloomington, Indiana, USA)
Johan Eklund (Jönköping International Business School, Jönköping University, Jönköping, Sweden)
Andreas Högberg (Jönköping International Business School, Jönköping University, Jönköping, Sweden)

Journal of Financial Economic Policy

ISSN: 1757-6385

Article publication date: 31 May 2011

Abstract

Purpose

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.

Design/methodology/approach

The paper measures investment efficiency using the accelerator principle and examines the effect of ownership type on capital allocation.

Findings

No significant improvement in capital allocation during the period studied is found. The findings suggest firms face significant costs in adjusting their capital stock.

Originality/value

The paper uses unique data to estimate the elasticity of capital with respect to output.

Keywords

Citation

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

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited