Cash Flow and Capital Spending: Evidence from Capital Expenditure Announcements

Stephen C. Vogt

Financial Management, 1997, vol. 26, issue 2

Abstract: Pecking-order and free-cash-flow behavior are two explanations for the reliance of US corporations on cash flow from operations to finance capital expenditures. However, each explanation has different implications for financial management; cash flow hoarding for the former and cash flow payout for the latter. The empirical findings in this article suggest that firm size plays a significant role in determining appropriate financial policy for corporations.

Date: 1997
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