Do adjustment costs explain investment-cash flow insensitivity?

Sangeeta Pratap

Journal of Economic Dynamics and Control, 2003, vol. 27, issue 11, 1993-2006

Abstract: In this paper, I explain two “puzzles” that have been observed in firm level data. First, firms that display a high sensitivity of investment to cash flow (commonly believed to be an indicator of liquidity constraints) usually have large unutilized lines of credit which, presumably, could be used to overcome the shortage of funds. Second, firms that are perceived to be extremely liquidity constrained actually show very little sensitivity of investment to cash flow.

Keywords: Liquidity constraints; Adjustment costs; Tobin's q (search for similar items in EconPapers)
JEL-codes: E22 G31 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Do adjustment costs explain investment-cash flow insensitivity? (2003)
Working Paper: Do Adjustment Costs Explain Investment-Cash Flow Insensitivity? (2001)
Working Paper: DO ADJUSTMENT COSTS EXPLAIN INVESTMENT-CASH FLOW INSENSITIVITY? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:27:y:2003:i:11:p:1993-2006

DOI: 10.1016/S0165-1889(02)00113-6

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