Title: On the negative relation between investment-cash flow sensitivities and cash-cash flow
Authors: D'Espallier, Bert
López-Iturriaga, Félix
Issue Date: Sep-2009
Publisher: K.U.Leuven - Faculty of Economics and Applied Economics
Series Title: FBE Research Report AFI_0930 pages:1-40
Abstract: We predict and find empirical support for a negative relation between the firm’s investment-cash flow sensitivity
and cash-cash flow sensitivity, two measures suggested to capture the concept of financing constraints. This negative relation on the firm-level stems from the fact that both investments and the cash account are uses of funds competing for limited available cash flows. Additionally, we find that the investment-cash flow sensitivity is a better predictor for the firm’s constraint-status than the cash-cash flow sensitivity for a longitudinal sample of 1,233 U.S.-based listed firms using an evaluative framework based upon ex-post evaluation of the firmvarying sensitivities.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center Finance, Leuven
Formerly "Subfaculteit Antwerpen/Handelswetenschappen - TM A"

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