Panel data on 788 modern sector Indian firms during 1965–78 are used to analyse the link between the size of a firm and its financial environment. Exogeneity tests reveal that large firms with improved investment prospects could obtain external finance at the margin, but that small firms could not. The policy of directing bank credit accordingly relaxed a binding constraint on small firms, raising investment. Assuming that all of the rise in the credit‐sales ratio in small firms was policy‐induced then so was about one third of the 170 per cent rise during 1965—78 in their investment—sales ratio.
No takes yet. Share an insight, caveat, or question.
Eastwood et al. (1999) studied this question.
Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context: