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Gross Block

From the table (6), when the investment in Gross Block as a dependent variable is studied, the independent variable that is, Debt Outstanding is found to be significant in 11 estimated equations at 5% level and in four equations at 10% level in nine firms like, Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd., Zandu Pharmaceutical works Ltd., Madras Refineries Ltd. et cetera under Adding model. When the aggregate of sample firms is taken as a whole, in Adding model this particular variable appears to be significant at 5% level in three equations out of eight estimated equations.

Debt Outstanding shows an impact on investment in Gross Block. Its level of significance is 5% in five equations and 10% level in four estimated equations under Constant model in nine companies like, BASF India Ltd., Bayer (India) Ltd., Cheminar drugs Ltd., Glaxo India Ltd., Madras Refineries Ltd., Parke Davis (India) Ltd., Zandu Pharmaceutical works Ltd. et cetera. Considering the sample firms’ aggregate level in Constant model it is found to be significant at 5% level in only one equation out of six estimated equations. In 10 companies like, BASF India Ltd., Bayer (India) Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd. et cetera the independent variable Debt Outstanding is found to be significant in 24 equations at 5% level and in four equations at 10% level under Elimination model. Taking the Chemical Industry as a whole, its level of significance is 5% in all the seven estimated equations under Elimination model.

Debt Outstanding as an independent variable is found to be significant in 40 equations under all the three models that is Adding, Constant and Elimination models in firms like, BASF India Ltd. Bayer (India) Ltd., Glaxo India Ltd., Nicholas Piramal India Ltd., Parke Davis (India) Ltd. and Zandu Pharmaceutical Works Ltd. In Cipla Ltd., Colour Chem Ltd., Excel Industries Ltd., Gujarat Stte Fert & Chemicals Ltd., Indian Oil Corporation Ltd., Indian Petro Chemicals Corporation Ltd., Pidilite Industries Ltd. and Rhone-Poulenc (India) Ltd., it is not significant in any of the equations under Adding model or Constant model or Elimination model. In Cheminar drugs Ltd., this particular variable appears to be significant in two equations under Constant and Elimination models.

In case of Clariant (India) Ltd., in only one equation it is significant under Constant model. In the case of Gujarat Narmada Valley Fert. Co. Ltd., in only one equation it is significant at 5% level under Elimination model. In Madras Refineries Ltd., it is found to be significant in two equations under Adding and Constant models. In Monsanto Chemicals of India Ltd. and Tata Chemicals Ltd., this variable is significant in six equations under Adding and Elimination models. In 10 firms out of a total of 20 firms it is significant in most of the equations under Elimination model.

Y2-Plant and Machinery

In Adding model in nine companies like, Colour Chem Ltd., Nicholas Piramal India Ltd., BASF India Ltd., Cheminar Drugs Ltd., Indian Oil Corporation Ltd., et cetera this particular independent variable is significant in 12 equations at 5% level and in five equations at 10% level. When the equations in the Adding model are tested at the aggregate of firms level in Chemical Industry this particular variable has shown an impact at 5% level in two equations out of eight estimated equations. Debt Outstanding as a variable in Constant model is found to be significant at 5% level in four equations and at 10% level in two estimated equations in six firms like, BASF India Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd., Parke Davis (India) Ltd., Pidilite Industries Ltd. et cetera. Taking the aggregate of sample firms, this independent variable is found to be significant at 5% level in only one equation out of six estimated equations.

When the investment in Plant and Machinery as a dependent variable is studied the independent variable that is, Debt Outstanding appears to be significant at 5% level in 28 estimated equations and in 12 equations at 10% level in 12 companies like, BASF India Ltd., Bayer (India) Ltd., Cheminar drugs Ltd., Clariant (India) Ltd., colour Chem Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramil India Ltd., Parke Davis (India) Ltd., Pidilite Industries Ltd. et cetera under Elimination model. When the sample firms’ aggregate level is taken as a whole, it is found to be not significant in all the three estimated equations under Elimination model.

In BASF India Ltd., Cheminar Drugs Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd. and Parke Davis (India) Ltd., Debt Outstanding as a variable is found to be significant in 34 equations under Adding, Constant and Elimination models. This particular variable is significant in 17 equations under Adding and Elimination models in firms like, Bayer (India) Ltd., Colour Chem Ltd., Indian Oil Corporation Ltd. and Zandu Pharmaceutical Works Ltd. In the case of Clariant (India) Ltd., in four equations it appears to be significant under Constant and Elimination models. In Madras Refineries Ltd. and Pidilite Industries Ltd., it is significant in seven equations under Elimination model only. Debt Outstanding is found to be not significant in any of the equations in companies namely, Cipla Ltd., Excel Industries Ltd., Glaxo India Ltd., Gujarat Narmada Valley Fert. Co. Ltd., Gujarat State Fert & Chemicals Ltd., Indian Petro Chemicals Corporation Ltd., Rhone-Poulenc (India) Ltd. and Tata Chemicals Ltd. under Adding model or Constant model or Elimination model.In 12 firms out of 20 firms, in most of the equations, this variable is found to be significant under Elimination model.

Y1. Gross Block

From the table (7), Provision for Taxes shows an impact on investment in Gross Block. Its level of significance is 5% level in three equations and 10% level in only one equation under Adding model in four firms like, Monsanto Chemicals of India Ltd., Colour Chem Ltd. et cetera. When the equations in the Adding model are tested at the aggregate of firms level in Chemical Industry, this explanatory variable appears to be significant at 10% level in only one equation out of eight Estimated equations. When the investment in Gross Block as a dependent variable as studied, Provision for Taxes as an independent variable is found to be not significant in any of the equations under Constant model and at their aggregate level also.

When the influence of Provision for Taxes as an independent variable is tested on Gross Block as a dependent variable under Elimination model in 20 estimated equations it appears to be significant at 5% level and in four equations it is significant at 10% level in 11 companies like, Cheminar Drug Ltd., Colour Chem Ltd., Excel Industries Ltd., Indian Oil Corporation Ltd., Pidilite Industries Ltd., Zandu Pharmaceutical Works Ltd. et cetera. When the sample firms’ aggregate level is taken, it is significant in only one equation out of seven estimated equations.

Provision for Taxes is found to be significant in 11 equations in firms like, Colour Chem Ltd., Glaxo India Ltd., Monsanto Chemicals of India Ltd. and Tata Chemicals Ltd. under Adding and Elimination models. In the case of Cheminar drugs Ltd., Excel Industries Ltd., Indian Oil Corporation Ltd., Madras Refineries Ltd., Nicholas Piramal India Ltd., Pidilite Industries Ltd. and Zandu Pharmaceutical Works Ltd., it is significant in 18 equations under Elimination model only. In BASF India Ltd., Bayer (India) Ltd., Cipla Ltd., Clariant (India) Ltd., Gujarat Narmada Valley Fert. Co. Ltd., Gujarat State Fert & Chemicals Ltd., Indian Petro Chemicals Corporation Ltd., Parke Davis (India) Ltd. and Rhone-Poulenc (India) Ltd., it is found to be not significant in any of the equations under Adding model or Constant model or Elimination model. In 11 firms out of a total of 20 firms, this particular variable is found to be significant at either 5% level or 10% level in most of the equations under Elimination model.

Y2.Plant and Machinery

In Adding model Provision for Taxes as a variable is found to be significant at 5% level in two equations and in four equations at 10% level of significance in five firms like, Zandu Pharmaceutical Works Ltd. et cetera. At the aggregate of sample firms in the Chemical Industry, in Adding model, in two equations it appears to be significant at 5% level out of eight estimated equations.

When the investment in Plant and Machinery as a dependent variable is studied, the independent variable that is, Provision for Taxes is found to be significant in two equations at 5% level and in one equation at 10% level in three companies like, BASF India Ltd., Madras Refineries Ltd., Zandu Pharmaceutical Works Ltd. under Constant model. When the equations under the Constant model are tested at the aggregate of firms level in Chemical Industry, this particular variable appears to be significant at 5% in only one equation out of six estimated equations. This particular explanatory variable in Elimination model is found to be significant at 5% level in 11 equations and in nine equations at 10% level in 11 firms like, Excel Industries Ltd., Glaxo India Ltd., Madras Refineries Ltd., Monsanto Chemicals of India Ltd., Zandu Pharmaceutical Works Ltd. et cetera. Considering the Chemical Industry as whole, its level of significance in all the three estimated equations is 5% under Elimination model.

In Madras Refineries Ltd. and Zandu Pharmaceutical Works Ltd., Provision for Taxes is found to be significant in 11 equations under Adding, Constant & Elimination models. In the case of Cheminar Drugs Ltd., Cipla Ltd., Gurajar State Fert & Chemicals Ltd., Indian Petro Chemicals Corporation Ltd., Monsanto Chemicals of India Ltd., Pidilite Industries Ltd., Rohne-Poulenc (India) Ltd. and Tata Chemicals Ltd., it is significant in 11 equations under Elimination model only. In Bayer (India) Ltd., Clariant (India) Ltd., Colour Chem Ltd., Gujarat Narmada Valley Fert. Co. Ltd., Nicholas Piramal India Ltd. and Parke Davis (India) Ltd., it is found to be not significant in any of the equations under Adding model or Constant model or Elimination model. In BASF India Ltd., it is significant in only one equation at 10% level under Constant model. In Glaxo India Ltd. and Indian Oil Corporation Ltd., this variable is found to be significant in two equations under Adding model only. In Excel Industries Ltd., in four equations it appears to be significant under Adding & Elimination models. In 11 firms out of 20 firms, this particular variable is found to be significant in most of the equations under Elimination model.

Y1- Gross Block

From the table (8), it can be seen that, in Adding model, in six companies like, Glaxo India Ltd., Gurajar State Fert & Chemicals Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd., Tata Chemicals Ltd. et cetera Interest on Borrowed Funds as an independent variable is found to be significant in two equations at 5% level and in four equations at 10% level. Taking the aggregate of sample firms as a whole, Interest on Borrowed Funds is found to be not significant in any of the estimated equations under Adding model.

When the investment in Gross Block as a dependent variable is studied, the independent variable that is, Interest on Borrowed Funds appears to be significant at 5% level in two equations and at 10% level in only one equation under Constant model in three firms like, Gujarat State Fert & Chemicals Ltd., Madras Refineries Ltd. et cetera. In the total Chemical Industry as a whole, this particular variable is found to be significant at 5% in only one equation out of six estimated equations under Constant model.

Interest on Borrowed Funds shows an impact on investment in Gross Block in 18 equations at 5% level of significance and in nine equations at 10% significance level in 13 companies like, BASF India Ltd., Excel Industries Ltd., Gujarat State Fert & Chemicals Ltd., Madras Refineries Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd., Tata Chemicals Ltd. et cetera under Elimination model. When the sample firms aggregate level is taken as a whole, this particular variable appears to be significant at 5% level in only one equation out of seven estimated equations under Elimination model.

In Gujarat State Fert & Cheminals Ltd., this explanatory variable is significant in five equations in all the three models. In 13 equations of firms like, BASF India Ltd., Clariant (India) Ltd., Colour Chem Ltd., Excel Industries Ltd., Pidilite Industries Ltd. and Zandu Pharmaceutical Works Ltd., it is found to be significant under Elimination model only. In case of Cheminar Drugs Ltd., Glaxo India Ltd., Monsanto Chemicals of India Ltd., Nicholas Piramal India Ltd. and Tata Chemicals Ltd., it appears to be significant in 13 equations under Adding and Elimination models. In Bayer (India) Ltd., Cipla Ltd., Indian Oil Corporation Ltd., Indian Petro Chemicals Corporation Ltd. and Rohne-Poulenc (India) Ltd., it is found to be not significant in any of the equations under Adding model or Constant model or Elimination model. In case of Gujarat Narmada Valley Fert. Co. Ltd., it is significant at 5% level in only one equation under Constant model. In Madras Refineries Ltd., Interest on Borrowed Funds is significant in three equations under Constant and Elimination models. In 13 Companies out of a total of 20 firms this particular variable is found to be significant in most of the Equations under Elimination model.

Y2-Plant & Machinery

Interest on Borrowed Funds shows an impact on investment in Plant and Machinery. Its level of significance is 10% in three equations under Adding model in three firms like, Nicholas Piramal India Ltd. et cetera. When the aggregate of sample firms is taken as a whole, in only one equation, it is found to be at 5% level of significance out of eight estimated equations. When the influence of Interest on Borrowed Funds as an independent variable is tested on Plant and Machinery as a dependent variable under Constant model, it is found to be significant at 5% level in one equation and 10% level in one equation in two companies like, Colour Chem Ltd. et cetera. Considering the aggregate of sample firms as a whole, it is found to be significant at 10% level in only one equation out of six estimated equations under Constant model.

In Elimination model, Interest on Borrowed Funds as a variable, appears to be significant at 5% level in 14 equations and in 13 equations at 10% level in 11 firms like, BASF India Ltd., Bayer (India) Ltd., Cheminar Drugs Ltd., Colour Chem Ltd., Excel Industries Ltd., Nicholas Piramal India Ltd., Rohne-Poulenc (India) Ltd., Tata Chemicals Ltd. et cetera. When the equations in the Elimination model are tested at the aggregate of firms level in Chemical Industry, this particular variable has shown an impact at 5% level in three equations out of seven estimated equations.

Interest on Borrowed Funds in an explanatory variable appears to be significant in 12 equations under Adding and Elimination models in firm like, BASF India Ltd., Excel Industries Ltd. and Nicholas Piramal India Ltd. In the case of Bayer (India) Ltd., Gujarat State Fert & Chemicals Ltd., Indian Petro Chemicals Corporation Ltd., Madras Refineries Ltd., Rohne-Poulenc (India) Ltd. and Tata Chemicals Ltd., it is found to be significant in 13 equations under Elimination model only. In Colour Chem Ltd. and Monsanto Chemicals of India Ltd., this variable is significant in seven equations under Constant and Elimination models. In case of Cheminar Drugs Ltd., Cipla Ltd., Clariant (India) Ltd., Glaxo India Ltd., Gujarat Narmada Valley Fert. Co. Ltd., Indian Oil Corporation Ltd., Parke Davis (India) Ltd., Pidilite Industries Ltd. and Zandu Pharmaceutical Works Ltd., this dependent variable is found to be not significant in any of the equations under Adding model or Constant model or Elimination model. In 11 firms out of a total of 20 firms, this particular variable as shown an impact at either 5% level or 10% level under Elimination model.

FINDINGS AND CONCLUSIONS

The Summary of the analysis is presented in the tables the following conclusions are drawn.

1. The major finding of the study is that, the elimination model is the most appropriate model in determining the behavior of investment in total fixed assets & plant and machinery separately.

2. The results of this analysis suggest that gross internal funds (retained earnings + depreciation) are more important for the fixed investment in almost all the companies in the present study.

3. Change in sales (growth rate in sales), stock of net liquidity, debt outstanding dividends are also significant determinants of fixed investment.

4. The study reveals that demand considerations in the long-run are of some importance in the entrepreneurial fixed investment decisions. Financial considerations seem to dominate over demand factors in fixed investment decisions.

5. The implication of the results of the present study is that profitability is an important consideration in entrepreneurial investment decisions. Profits influence dividend policies and hence retained earnings. Retained earnings in turn influence investment. Profits influence dividends and dividends influence the flow of external finance.

6. External finance in turn exerts its influence on investment. Thus profits both directly and indirectly influence investment, directly through retained earnings and indirectly through external finance.

7. As retained earnings is an important factor in the determination of investment, it is important to see that higher profitability is not dissipated through dividend disbursals. As self financing is non-inflationary, it may be desirable to encourage asset expansion through internal savings rather than through borrowings.

Table 1-4.
tABLEDeterminants of Investment in-4

Table 4-8.
Determinants of Investment in-5