Determinants of Investment Cash Flow Sensitivity
Author:
- 1 March 2009
- journal article
- Published by Wiley in Financial Management
- Vol. 38 (1) , 161-183
Abstract
I classify firms into groups of high, low, and negative sensitivity. I find that investment‐cash flow sensitivity is nonmonotonic with respect to financial constraints, cash flows, and growth opportunities. Firms classified as negative cash flow sensitive have the lowest cash flows, highest growth opportunities, and appear the most financially constrained. Cash flow insensitive firms have the highest cash flows, lowest growth opportunities, and appear the least financially constrained. To a large extent, the negative relationship between cash flow and investment is driven by the opposite trends followed by investment and cash flow, as firms grow through stages of their life cycle.Keywords
This publication has 36 references indexed in Scilit:
- The U-Shaped Investment Curve: Theory and EvidenceJournal of Financial and Quantitative Analysis, 2007
- Corporate Investment with Financial Constraints: Sensitivity of Investment to Funds from Voluntary Asset SalesJournal of Money, Credit and Banking, 2006
- Market Timing and Capital StructureThe Journal of Finance, 2002
- Financial Constraints and Stock ReturnsThe Review of Financial Studies, 2001
- Agency Cost Of Free Cash Flow, Corporate Finance, and TakeoversSSRN Electronic Journal, 1999
- Investment and Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel DataReview of Economics and Statistics, 1998
- The New Issues PuzzleThe Journal of Finance, 1995
- Sources of the Financing Hierarchy for Business InvestmentReview of Economics and Statistics, 1992
- Corporate financing and investment decisions when firms have information that investors do not haveJournal of Financial Economics, 1984
- Determinants of corporate borrowingJournal of Financial Economics, 1977