The Cash Flow-Investment Relationship: International Evidence of Limited Access to External Finance

Aggarwal, Raj; Zong, Sijing

doi:10.2139/ssrn.710583

Cited by 21 publications

(19 citation statements)

References 26 publications

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“…The appealing examples of these include the WW index of Whited and Wu (2006), the synthetic index of Musso and Schiavo (2008) and the SA index proposed by Hadlock and Pierce (2010). Aggarwal and Zong (2006) adopt discriminant analysis to estimate a beginning-of-period financial constraint index using the variables used by Cleary (1999) and use that index to classify firms of the four largest industrialized countries (US, UK, Japan and Germany) into three financial constraint categories.…”

Section: Classification Of Firms Into Financially More or Less Constrmentioning

confidence: 99%

Corporate efficiency, credit status and investment

Quader

Taylor

2017

The European Journal of Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 8285 June 2014 ABSTRACT Corporate Efficiency, Credit Status and InvestmentUsing a panel of 1122 UK firms listed on the London Stock Exchange over the period of 1981 to 2009, endogenous switching regression models (SRM) incorporating a predicted corporate efficiency index are estimated in this paper in an effort to clarify the role of cash flow in examining the impact of capital-market imperfections. It is revealed that a firm's constrained credit status changes with the improvement of its efficiency. The results further reveal that financially constrained firm's investment is comparatively more sensitive to cash flow, but this sensitivity is negatively and significantly related with corporate efficiency. These results point to the fact that high investment sensitivity to cash flow may not be solely driven by measurement error in investment opportunity, but may still be interpreted as a consequence of imperfect substitutability between internal and external financing arising from the capital market imperfections.JEL Classification: C34, D92, G14, L21

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Section: Classification Of Firms Into Financially More or Less Constrmentioning

confidence: 99%

Corporate efficiency, credit status and investment

Quader

Taylor

2017

The European Journal of Finance

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“…While some research have focused in developed countries like Canada, France, Germany, Japan, Netherlands and the UK (see Aggarwal & Zong, 2006;Cleary et al, 2007), some fewer studies have analysed data for some emerging economies like China, Chile, India, Indonesia, Mexico and Taiwan (see Shen & Wang, 2005;Ghosh, 2006). For example, Henry (2000) examined 11 developing countries that opened their stock markets to large investors and showed that firms experienced an increase in private investment Jorgerson and Stephenson (1967) analysed the impact of economic and FL on the corporate sector for the US and found positive effect of financial liberalisation on corporate investment.…”

Section: Related Literature Examining External Financing and Corporatmentioning

confidence: 99%

Influence of External Sources of Funding on Corporate Financial Policies in a Pre-Financial Crisis Period in South Africa—A Case Study of Mauritian Enterprises

Prayagsing¹,

Jankee²

2017

JEPF

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“…Various empirical studies such as those of Allayannis and Mozumdar (2004) and Pawlina and Renneboug (2005); Cleary (2006); Love and Zicchino (2006); Aggarwal and Zong (2006) and Islam and Mozumdar (2007) have focused on the analysis of the relationship between investment and internal funds. The study of Pawlina and Renneboug (2005) show that firms with excess cash and strong growth opportunities chooses to finance investment through internal resources.…”

Section: Empirical Reviewmentioning

confidence: 99%

“…Love and Zicchino (2006) found that financial factor, indicating the degree of financial stress, have positive effect on investment. In turn, Aggarwal and Zong (2006) argue that firms characterized by financial constraints have higher cash flow investment sensitivity than firms not financially constrained. Baum et al (2006) show that when macroeconomic conditions are volatile, managers have a more conservative behavior by increasing the company's cash position to finance their investments.…”

Section: Empirical Reviewmentioning

confidence: 99%

Corporate Investment and Cash-Flow Sensitivity: Evidence from a Jasmin Revolution Period in Tunisian Market

Basty

2016

Asian Economic and Financial Review

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This study investigates the impact of financial constraints on investment decisions and corporate cash holding of Contribution/ OriginalityThe study contributes to the existing literature by considering jointly the effects of financial constraints on investment decisions and corporate cash holding. It believes that constrained firms present investment cash-flow sensitivity higher than firms less constrained and conversely, they present lower cash-flow cash sensitivity.

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The Cash Flow-Investment Relationship: International Evidence of Limited Access to External Finance

Cited by 21 publications

References 26 publications

Corporate efficiency, credit status and investment

Corporate efficiency, credit status and investment

Influence of External Sources of Funding on Corporate Financial Policies in a Pre-Financial Crisis Period in South Africa—A Case Study of Mauritian Enterprises

Corporate Investment and Cash-Flow Sensitivity: Evidence from a Jasmin Revolution Period in Tunisian Market

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