Outward orientation, investment and finance constraints: A study of Indianfirms

We investigate the presence of finance constraints on firms investment beha viour using Indian manufacturing as a case study: This question becomes par ticularly interesting in the post-1991 period when substantial market orien ted reforms were undertaken, We argue that in the Indian institutional cont ext (especially, the underdeveloped state of bankruptcy laws and restrictiv e exit procedures) outward orientation rather than size is the relevant cri teria for distinguishing firms that may be 'finance-constrained' from those that are not. Using panel data for 718 Indian manufacturing firms for the period 1993-98, we find that exporting firms are less constrained in financ ial markers than firms which sell primarily to domestic markets.