Survival and Death in the Indian Corporate Sector

Abstract

Purpose

A company as an entity could cease to exist owing to its merger and dormancy in activity. The latter can be attributed to two causes – unsustainability of present state of production or shell companies. Therefore, three questions are posed – one, why do companies merge, two – why do companies shut down and third – of those that disappear can they be identified as shell.

Methodology/approach

The motives for each of these cases of disappearance of a company are enlisted and a firm-level analysis is undertaken where each firm is compared with a counterfactual.

Findings

It is found that companies that survived despite the inefficiencies and smaller market shares were the ones that had some foreign affiliation and were unrelated to existing business entities. On the other hand, the dormancy or shutdown can be attributed to lack of access to imported technology and low shares of market with dismal profitability. With the growing intensity of globalisation, the Indian corporate sector is now more prone to global economic conditions. Lastly, the disappearance or shutdown of companies that may have been used for tax avoidance is supported by the data.

Originality/value

The present study is the first to amalgamate and discuss various the causes for shutdown of companies. Further, the methodology adopted is unique in terms of the use of counterfactuals.

Citation

Tandon, S. (2016), "Survival and Death in the Indian Corporate Sector", Dead Firms: Causes and Effects of Cross-border Corporate Insolvency (Advanced Series in Management, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 77-111. https://doi.org/10.1108/S1877-636120160000015004