Essays on access to finance: A case study of Indian firms

This thesis investigates access to finance in listed Indian firms. The Indian market offers an interesting context for my investigation. For instance, although India has one of the leading global economies, it is characterised by weak corporate governance and little investor protection. Therefore, the results found in previous studies on developed economies may not apply to India or other similar empirical settings. I aim to answer three questions. First, how audit quality impacts access to finance for Indian listed firms. Second, what is the influence of independent directors on access to finance in listed firms in India. Third, to what extent does gender diversity on boards affect access to finance in Indian listed firms. I use secondary data from Prowessdx database to examine these relationships. Limited attention theory is applied to interpret the results on firms’ access to finance by exploring the capital providers’ perceptions of these firms. The findings show that providers of finance consider fees from both audits and non-audits to be a signal of a high-quality audit, which enhances the credibility of the financial statements and in turn has a desirable impact on firms’ access to finance. Financial providers also consider the percentage of independent directors on the board to be a red flag; this can negatively affect a firm’s access to finance. However, the remuneration of the independent directors has a beneficial impact on a firm’s access to finance. Additionally, the finding provide weak evidence of financial providers considering the presence of female directors on boards and their participation on board committees to be a ‘green flag’, positively affecting firms’ access to finance. The results showed consistency when additional tests were run. The implications of this thesis can assist regulatory authorities to enhance the regulations in India.