Information asymmetry and investment–cash flow sensitivity

Stock Market Liquidity: Financially Constrained Firms and Share Repurchase

“…Other popular measures are the cash-cash flow sensitivity of Almeida, Campello, and Weisbach (2004), the WW index of Whited and Wu (2006), and the HP index of Hadlock and Pierce (2010). Ascioglu et al (2008) argue that when a classification scheme for identifying constrained firms is based upon a measure correlated with net worth or internal funds, the characters of those firms, such as investment-cash flow sensitivity, are not consistent for firms with financial constraint. By collecting detailed qualitative information from financial filings to categorize financial constraint for a random sample of firms from 1995 to 2004, Hadlock and Pierce (2010) cast serious doubt on the validity of the KZ index, while offering mixed evidence on the validity of other common measures of constraint (Note 8).…”

“…Intercepts are not reported. Ascioglu et al (2008), the more liquid a firm's stock, the more likely it is unconstrained. High illiquidity implies high information asymmetry between the firm and the market, increasing costs of external financing.…”

Econometric Analysis of Investment and Internal Finance under Asymmetric Information: A Case Study of Manufacturing companies of Pakistan

“…So far as the investment of large size firms is concerned, it responds to the cash flow changes but their borrowing power is independent of the level of their internal funds. Islam ( 2002)examines the relationship between sensitivity of investment 11 Stocks of marketable securities, cash or ability of the firm to issue default-risk-free debt, firms may raise slack through retaining the incomes (i.e. not paying dividends) or through the issue of new stock.…”

“…not paying dividends) or through the issue of new stock. 12 Managers make overinvestment in order to expand the size of the business and pretend to exhibit a higher performance of the firm. The objective behind this effort is their promotion, bonus etc.…”

Measuring Information Asymmetry in Large Active Firms on the Tehran Stock Exchange

“…Also Easley et al (1997b) argued about information content between trades, Easley et al (1997a) about trade size, Easley et al (1998) about analyst coverage, Easley et al (2001) about stock splits, and Easley et al (2002) about asset pricing. Many studies used PIN index as proxy of information asymmetry, such as Heidle and Huang (2002), Vega (2006), Ascioglu et al (2008), Brockman andYan (2009), Kang (2010), Aslan et al (2011), Abad and Yague (2012), Chen and Zhao (2012), Dey and Radhakrishna (2015), Lin et al (2013), Sankaraguruswamy et al (2013), Chang and Lin (2015), Agudelo et al (2015) and Paparizos et al (2016).…”