Investment, financial constraints and financial liberalization: Some stylized facts from a developing economy, India [An article from: Journal of Asian Economics]

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Description:
The paper investigates the impact of financial liberalization on the investment patterns in a developing economy, India. The empirical findings reveal a mixed evidence in favour of the hypothesis that the liberalization effort has succeeded in relaxing financial constraint faced by the Indian firms. The small and young firms in the sample experienced a significant increase in financial constraint in the post liberalization period. A plausible explanation for such adverse result can be attributed to the progressive reduction in government intervention in resource allocation.