Corporate governance, relationship, lending and monetary policy: Firm level evidence from India

Abstract

The paper assembles data on over 1,000 manufacturing and services firms in India for the entire post-reform period from 1992 through 2002 to examine the association between corporate governance and monetary policy. The findings suggests that (a) public firms are relatively more responsive to a monetary contraction vis-à-vis their private counterparts; and, (b) quoted firms lower their long-term bank borrowings in favour of short-term borrowings, post monetary tightening, as compared with unquoted firms. A disaggregated analysis based on firm size and leverage above a certain threshold also validates these findings. The study concludes by analysing the broad policy implications of these findings.