Financial Constraints and Investment Financing Decisions among Indian Firms in Post Sub Prime Crisis Era

Abstract

The study investigated the sources of investment financing by Indian non-financial companies and the extent of dependency on internal funds to finance their investment projects since the U.S. Sub-prime mortgage crisis. A balanced panel of 359 firms for the period of 2006-2020 was estimated by GMM, Fixed Effect, Random Effect and OLS Pooled technique for three groups of firms. The result indicated that internal funds were highly important for all categories of firms. Further, higher investment cash flow sensitivity for the smaller firms demonstrated that these firms did not have easy access to capital markets compared to larger firms despite significant reform measures in the Indian financial market since 1991.