Faculty Publications
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Item Effects of energy price rise on investment: Firm level evidence from Indian manufacturing sector(Elsevier, 2015) Sadath, A.C.; Rajesh Acharya, H.R.This paper analyses the effects of the rising prices of energy products on the investment of a large panel of manufacturing firms in India during 1993-2013. The prime motivation behind this study is the absence of an empirical study into this research issue exclusively on Indian economy. The empirical results obtained by estimating an Error Correction Model (ECM) using Generalized Method of Moments (GMM) show that energy price rise has negative effect on the investment of firms in the manufacturing sector. The negative effect is transmitted to the firm's investment through both demand-side and supply-side factors. The transmission also depends upon factors such as the energy intensity of production. The results also show that the sales-growth-investment relationship becomes weak in the face of the rising prices of the energy which could be due to the cautious approach to investment adopted by the firms. Therefore, it calls for the attention of the policy makers to evolve a comprehensive energy-policy to ensure continuous supply of energy at affordable prices to the manufacturers. © 2015 Elsevier B.V.Item Energy price uncertainty and investment: Firm level evidence from Indian manufacturing sector(Econjournals ijeep@econjournals.com, 2016) Rajesh Acharya, H.R.; Sadath, C.A.Uncertainty whatsoever has undoubtedly been deemed to be malevolent to the interests of investors. Theories of partial irreversibility of investment argue that uncertainty at the micro level negatively impacts the firm’s investment and thereby, at least, slow the process of capital accumulation. Therefore, the present study, empirically analyzes how energy price uncertainty affects investment decisions of manufacturing firms in India. A variety of panel data models are estimated using generalized method of moments with data pertaining to Indian manufacturing firms over the period 1992-1993-20132014. Results are consistent with irreversible investment literature on the supply side of production, which shows that energy uncertainty has a negative effect on the capital accumulation in the manufacturing sector and this effect transpires in the form of firm’s inability to adjust its actual capital stock to match up to its potential desired capital stock as proposed by the investment theories. © 2016, Econjournals. All rights reserved.