Financial Liberalization and Firm's Choice of Financial Structure: Some Indian Evidence

This paper analyses the effect of financial liberalization, particularly equity market reforms on firm's choice of financial structure. The poper approaches the question with the use of two concepts: traditional sources and uses of funds and a concept of "marginal propensity towards debt", which measures the proportion of cash flow deficit being financed by debt. Our result provides some insight into the validity of received wisdom in explaining the behaviour of Indian corporate in response to the increasing "marketization" of financial system.