The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter
Are financial constraints preventing firms from importing capital goods? Sourcing capital goods from foreign countries is costly and requires internal or external financial resources. A simple model of foreign technology adoption shows that credit constraints act as a barrier to importing capital go...
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Oxford University Press on behalf of the World Bank
2014
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| Online Access: | http://hdl.handle.net/10986/19081 |
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okr-10986-190812021-04-23T14:03:51Z The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter Bas, Maria Berthou, Antoine assets bilateral trade cd consumer preferences debt econometric analysis elasticity elasticity of substitution fixed costs liquidity marginal costs monopolistic competition perfect information production function productivity productivity growth total factor productivity trade liberalization utility function wealth Are financial constraints preventing firms from importing capital goods? Sourcing capital goods from foreign countries is costly and requires internal or external financial resources. A simple model of foreign technology adoption shows that credit constraints act as a barrier to importing capital goods under imperfect financial markets. In our study, we investigate this prediction using detailed balance-sheet data from Indian manufacturing firms having reported information on financial statements and imports by type of good over the period 1997–2006. Our empirical findings shed new light on the micro determinants of firms' choices to import capital goods. Baseline estimation results show that firms with a lower leverage and higher liquidity are more likely to source their capital goods from foreign countries. Quantitatively, a 10 percentage point improvement of the leverage or liquidity ratio increases the probability of importing capital goods by 11 percent to 13 percent respectively. Different robustness tests demonstrate that these results are not driven by omitted variable bias related to changes in firm observable characteristics as well as ownership status. These findings are also robust to alternative specifications dealing with the potential reverse causality issues. 2014-07-30T20:13:10Z 2014-07-30T20:13:10Z 2012-11 Journal Article World Bank Economic Review 1564-698X 10.1093/wber/lhs002 http://hdl.handle.net/10986/19081 en_US CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Oxford University Press on behalf of the World Bank Publications & Research :: Journal Article India |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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en_US |
| topic |
assets bilateral trade cd consumer preferences debt econometric analysis elasticity elasticity of substitution fixed costs liquidity marginal costs monopolistic competition perfect information production function productivity productivity growth total factor productivity trade liberalization utility function wealth |
| spellingShingle |
assets bilateral trade cd consumer preferences debt econometric analysis elasticity elasticity of substitution fixed costs liquidity marginal costs monopolistic competition perfect information production function productivity productivity growth total factor productivity trade liberalization utility function wealth Bas, Maria Berthou, Antoine The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter |
| geographic_facet |
India |
| description |
Are financial constraints preventing firms from importing capital goods? Sourcing capital goods from foreign countries is costly and requires internal or external financial resources. A simple model of foreign technology adoption shows that credit constraints act as a barrier to importing capital goods under imperfect financial markets. In our study, we investigate this prediction using detailed balance-sheet data from Indian manufacturing firms having reported information on financial statements and imports by type of good over the period 1997–2006. Our empirical findings shed new light on the micro determinants of firms' choices to import capital goods. Baseline estimation results show that firms with a lower leverage and higher liquidity are more likely to source their capital goods from foreign countries. Quantitatively, a 10 percentage point improvement of the leverage or liquidity ratio increases the probability of importing capital goods by 11 percent to 13 percent respectively. Different robustness tests demonstrate that these results are not driven by omitted variable bias related to changes in firm observable characteristics as well as ownership status. These findings are also robust to alternative specifications dealing with the potential reverse causality issues. |
| format |
Journal Article |
| author |
Bas, Maria Berthou, Antoine |
| author_facet |
Bas, Maria Berthou, Antoine |
| author_sort |
Bas, Maria |
| title |
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter |
| title_short |
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter |
| title_full |
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter |
| title_fullStr |
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter |
| title_full_unstemmed |
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter |
| title_sort |
decision to import capital goods in india : firms’ financial factors matter |
| publisher |
Oxford University Press on behalf of the World Bank |
| publishDate |
2014 |
| url |
http://hdl.handle.net/10986/19081 |
| _version_ |
1764443528995274752 |