An Analysis of the Fund Raising Issues for Indian Family Businesses

Bajaj, Manish Kumar (2007) An Analysis of the Fund Raising Issues for Indian Family Businesses. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Family controlled businesses are a very important organizational type as families control many large businesses around the world. In India, family controlled businesses account for 70 percent of total sales and net profits of the biggest 250 private sector companies.

Family businesses play a very important role in the Indian economy.

The literature on financial intermediation system has divided the system in two types:

1) Bank Based and 2) Market Based. The literature in Indian financial intermediation system has stated that India's stock markets have a long history and have a large number of listed firms, but the size and role in terms of allocating resources of the markets are dominated by those of the banking sector. The literature also states that informal lending market is a very important source of finance in India.

The dissertation has taken the finding of the literature as base and has attempted to develop an understanding about the view point of family businesses on the bank finance market and informal financing market in India,

The dissertation also tries to develop an understanding about the belief of the family businesses in India about various options available for raising finance.

The dissertation has used the qualitative method of research to achieve its objectives. Case Studies are used as the research strategy. Questionnaires are used as the main means for collecting the data. Further telephonic conversation was made with two respondents to gain a better insight about some specific issues.

In contradiction to earlier study this study has found that the bank financing market in India is very competitive and generally established family businesses do not face anyproblem in raising bank finance. The banks are very co-operative with the family businesses and are eager to finance projects of family businesses who have good market credibility. Informal lending markets are found to be important source of finance and established family businesses use it as a source of short term financing.

Family businesses in India appear to have a positive approach towards bank financing and listing of companies as funding options. The reason for a positive approach towards bank financing and listing of firms is that the family businesses seems to believe that there is no threat of reduction of influence and control in these options of funding.

Another important reason for a positive approach towards bank financing seems to be easy availability of bank financing for family businesses. Family businesses in India seems to have a negative approach towards private placement or external investors in the firm. The positive economic outlook in India has increased the level of activity in India. The majority family businesses in India are bullish about their businesses. This appears to have a positive effect on their mindset about various options of funding.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 06 Mar 2008
Last Modified: 05 Nov 2016 18:49
URI: http://eprints.nottingham.ac.uk/id/eprint/21506

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