Disciplining firms:The impact of trade reforms on profit margins in Indian industry

Kambhampati, U.S. and Parikh, A. (2003) Disciplining firms:The impact of trade reforms on profit margins in Indian industry. Applied Economics, 35 (4). pp. 461-470. ISSN 0003-6846

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Abstract

The paper analyses the effects of increased trade exposure on the profitability of firms in Indian industry. While trade reforms are often expected to decrease profit margins as firms struggle to compete in international markets, there is the possibility that increased competition may improve firm efficiency and provide a positive impetus to firm profitability. This paper is different from many others in this area in that it considers both these possibilities. An efficiency index is created to directly analyse the impact of changing efficiency levels on firm profit margins. Results indicate that liberalization significantly influenced profit margins. However, its main effect is through the impact that it has had on other firm variables - market shares, advertising, R&D and exports - all of which changed after 1991. While exports have had a pro-competitive effect on profit margins in the selected sample, AD and R&D both cause an increase in profit margins. It is also found that neither capital nor managerial capabilities (as proxied by remuneration) are particularly effective in increasing profit margins.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
Related URLs:
Depositing User: Pure Connector
Date Deposited: 19 Nov 2013 16:14
Last Modified: 25 Jul 2018 08:52
URI: https://ueaeprints.uea.ac.uk/id/eprint/44493
DOI: 10.1080/00036840210155177

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