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Purpose
The purpose of this paper is to study the efficiency of capital allocation, across levels of ownership, in the aftermath of pro‐market reforms in India.
Design/methodology/approach
The paper measures investment efficiency using the accelerator principle and examines the effect of ownership type on capital allocation.
Findings
No significant improvement in capital allocation during the period studied is found. The findings suggest firms face significant costs in adjusting their capital stock.
Originality/value
The paper uses unique data to estimate the elasticity of capital with respect to output.
© Emerald Group Publishing Limited
2011
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