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Essay On Fdi

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RESEARCH METHODOLOGY
In order to meet the objectives of the study to analyses the Impact of Foreign Direct Investment on Indian Economy, annual data have been collected from 2007-2016. However to make analysis between financial performance of FDI based Companies and Non FDI based Companies listed at BSE for 10 years has been considered. This study is based on secondary data. The required data have been collected from CMIE Prowess IQ data base.The tools used in the study are panel data Fixed Effect Model, Random Effect Model, Hausman test and Chow test. The sample size is selected on the basis of FDI definition given by IMF i.e. if foreign shareholding is 10% or more than 10% in the company that company will be considered as FDI based …show more content…

Profitability = f (Firm Quality Variables, Financial Variables) ----------------------------------------------------(1)
FDI Based Companies
ROAFDI= α+ β1 Age + β2Size + β3CR + β4QR + β5DTER + β6GSales + β7GPAT + β8GAssets + e ---------------------------------------------------------------------------------------------------------------------------------------------(2)
Non FDI Based Companies
ROANONFDI= α+ β1 Age + β2Size + β3CR + β4QR + β5DTER + β6GSales + β7GPAT + β8GAssets + e --------------------------------------------------------------------------------------------------------------------------------------------(3)

ANALYSIS AND INTERPRETATION
Food and Agriculture Sector

In the study Hausman test is done to know among fixed effect and random effect model which model is more suitable for 23 FDI based companies and 20 Non FDI Companies in Food & Agriculture sector, the results shows that for FDI based companies Random effect model is suitable (H =16.97, P=0.07) where as for Non FDI Companies fixed effect model is suitable (H=13.18 P=0.21). To know is there is any difference in the financial performance of FDI based companies and Non FDI Companies model is estimated separately. In table 2 the result of FDI based companies and Non FDI Companies in Food & Agriculture Sector from 2007 to 2016. Then Chow test is done to examine whether the coefficients obtained from the two samples are statistically different. The Chow test found to be F=0.21, thus F>F0.01

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