A Study on Corporate Earning Retention in India

Abstract

The role of saving in economic development has been recognized well by many Economists and empirical studies. Most of the industrializing economies in the world witnessed higher saving rates as compared to others. The countries achieving the highest saving rate between 30% and 50% of Gross Domestic Product are able to achieve higher economic and social developments. High saving rate was considered to be one of the important factors leading to fast economic development. The financial liberalization in the form of deregulating the interest rates, reducing the credit restrictions and opening-up of the financial market for foreign participants resulted in mobilizing saving for productive purposes. Liberalization with enhanced efficiency of the financial systems and proper channeling of saved resources in to productive uses would provide for the increase in income. The increased income resulting in higher consumption would lead to increased production and profitability. As the profitability is an important factor influencing corporate saving, the capacity of corporate entities to save depends on profit earning ability.