A stochastic frontier approach to modelling financial constraints in firms: An application to India

► We use the stochastic frontier approach to modelling financial constraint at of firms. ► It enables us to estimate a measure of financial constraint of each firm for each time period. ► An application to India shows that investment efficiency was reduced between 1997 and 2006. ► By 2006, business group membership was no longer able to reduce financial constraints of firms.