Impact of Resolving Insolvency on Entrepreneurial Activity in India

Abstract

The main purpose of this study was to analyse the impact of resolving insolvency on entrepreneurial activity in India. The study is empirical in nature and used the secondary source of data obtained from World Bank Reports for a period of 10 years from 2010 to 2019. Resolving insolvency is an explanatory variable, and entrepreneurial activity is a dependent variable. The resolving insolvency was expressed in terms of time to resolve insolvency, cost of resolving insolvency, recovery of creditors’ claims and strength of insolvency framework. Similarly, entrepreneurial activity was expressed in terms of total business density, new business density and closed business density of limited liability companies in India. It was presumed that the dimensions of resolving insolvency would influence entrepreneurial activity positively in India in a probabilistic manner. Both descriptive statistical measures, such as mean, median and standard deviation, and inferential statistical measures, such as multiple correlation and regression models, were used for data analysis. Adjusted R2 was used to test the model fitness, and Durbin–Watson test statistic was used to know whether auto-correlation exists. Eviews Statistical Software was used for this purpose. The study concludes that resolving insolvency has a positive impact on entrepreneurial activity in India but is of insignificant nature in the short run. The study further concludes that there are chances for a significant impact of resolving insolvency on the entrepreneurial activity in India in the long run. The level of significance may be increased if the number of observations and explanatory variables increases.