Corporate Financing in India: Some Stylized Facts of an Emerging Economy

Abstract

This paper investigates the corporate financing trends in an emerging economy; India. The study reveals some stylized facts prevalent in the Indian financial markets and how Indian firms are accessing their capital requirements. In-depth analysis has been performed on the balance sheet data of Indian nonfinancial firms during time period 1992-2012. Study focused on the capital financing received as debt, equity and related forms. Trends showed that debt ratios in India remain low and falling over years, while equity ratios remain rising. As a share of total debt, bank financing rose during this period; while non-bank debt declined, which suggests the underdeveloped Indian corporate debt market. At the same time equity market infrastructure has enabled many firms to look for high equity finance; study shows the increased use of internal financing for most of the firms’ asset creation. Overall, the paper suggests that, firms in India seems to be deprived of the availability of credit through poor debt market infrastructure and highlights the contemporary corporate financing issues.