FDI and Economic Performance of Firms in India

Abstract

<jats:p> FDI contributed positively to sales, profit, employment and wages of firms in India from 2004 to 2018. Foreign capital is complementing domestic capital well embodying technology and innovations required for expansion of domestic firms in it. Foreign promoters have played quite significant economic roles among firms across production sectors in manufacturing industry in India. Besides sales, total expenses, managerial remunerations and corporation taxes, involvement of foreign promoters are statistically significant determinants of profits, employment and wages among firms across all seven sectors of the manufacturing industry is clear from analysis of the Prowess database for years 2004, 2008, 2012 and 2014. These effects were even stronger in each of Modi–I years between 2015-2019 that followed the Make in India initiative in 2014. Reforms including the outright 100 per cent ownership provision in the automatic route in most industrial sectors have produced good outcomes that have not only raised the volume of FDI per capita from around 16 dollars in 2000 to 285 dollars in 2018 but also raised the global ranking of India to 63 out of 190 economies in 2019 on the ease of doing business, putting India 79 places above now than in 2014. Based on theoretical and empirical analysis it can be concluded that good sentiments of FDI in India in Modi–II years started in 2019 will prevent diminishing returns on capital and contribute towards sustainable growth in coming years. </jats:p><jats:p> JEL Codes: F21, F23, F14, J31, O53 </jats:p>

The moderation role of board independence change in the relationship between board characteristics, related party transactions, and financial performance

“…Accordingly, H4 is accepted, indicating that BICH moderates the relationship between board remuneration and banks’ performance. Bhattarai and Negi [ 110 ], Kang and Nanda [ 111 ], Das and Mohanty [ 112 ], and Lee and Isa [ 59 ] also indicate similar findings. Finally, the results show that the moderating effect of BICH does not significantly moderate the relationship between bank specifics and FP across all models.…”

“…However, from the accounting viewpoint, the results report a positive link between the two, indicating that directors’ remuneration contributes to firms’ intrinsic value but does not add significantly to firms’ extrinsic value. Similarly, Bhattarai and Negi [ 110 ] indicated that managerial remunerations, among several other variables, are statistically significant factors in firms’ profitability. Das and Mohanty [ 112 ] show that the average managerial remuneration has a significant impact on regular dividend-paying behavior of Indian firms.…”

“…However, from the accounting viewpoint, the results reported a positive link between the two indicating that directors’ remuneration contributes to firms’ intrinsic value but does not add significantly to firms’ extrinsic value. Bhattarai and Negi [ 110 ] indicated that managerial remunerations, among several other variables, are statistically significant factors in firms’ profitability for the years 2004, 2008, 2012, and 2014. Kang and Nanda [ 111 ] examined the effect of firms’ performance, size, ownership structure, BC, and other company characteristics on the disclosure of managerial remuneration of 134 Indian-listed firms from 2003 to 2012.…”

Intangibles, Intellectual Capital, and the Performance of Listed Non-Financial Services Firms in West Africa: A Cross-Country Analysis

“…In this study, we measure foreign direct investment as a ratio of foreign direct investment to the gross domestic product. We hypothesize a positive effect of foreign direct investment on the financial performance of firms [83].…”

Does Economic Freedom Influence the FDI–Growth Nexus in ASEAN Economies?

“…The traditional theories of economic growth like the Solow Model did not consider FDI as a determinant of economic growth, but new growth theories have shown FDI as having both level effect and rate effect on output. FDI has also been shown to have indirect effects on economic growth through various channels such as sales, profit, employment and wages (Bhattarai & Negi, 2020).…”