Impact of Select Parameters on Capital Generation in Indian Primary Capital Market: A Regression Analysis

Abstract

Corporate finance is raised from the primary capital market through public offers, rights issues and private placement, etc. Public offer is the largest sources of funds from the primary capital market to the company. The initial and subsequent capital issue of securities like equity shares, preference shares, debentures or bonds can be made in the primary market through public issues as well as rights issues.  Initial issue of securities is offered to the public through issue of prospectus and subsequently the public subscribe to them in the primary market directly. In post liberalisation era, capital raised in this market can be represented based on select parameters. They are category, issuer, instrument, sector, region and size. Each parameter has two or more elements against which capital is raised.The study analyses impact of capital generation against each element of select parameters on overall capital generation in Indian primary market during 1993-94 to 2013-14 using Multiple Linear Regression Analysis. Standardised regression coefficients for underlying elements of each parameter measure their impact on overall capital generation. Significance of the model is analysed using one way ANOVA. The study shows that each model developed for select parameters is statistically significant and capital generated against all elements under each parameter has excellent strength of association with total capital raised. Capital generated through Preference Shares and capital generated in small sizes does not have significant impact on overall resource mobilisation in Indian primary market.

Keywords: Indian Primary Capital Market, Resource Mobilisation, Parameters of Capital Generation, Multiple Linear Regression Analysis.

JEL Classification: O160, G170