Corporate Investments, Cash Flows and Cash Holdings: Evidence from the Oil Industry Before and After the Financial Crisis

Liqiang Chen

Accounting and Finance Research, 2016, vol. 5, issue 4, 192

Abstract: This paper studies corporate investments with internal funds when firms face real investment friction such as high adjustment cost and investment planning lag using a sample of U.S. oil companies from 2003 to 2011 before and after the 2008 financial crisis. We show that firms’ capital expenditures are more sensitive to their lagged cash holdings than to their contemporaneous cash flows. By making investments with realized cash holdings, firms can avoid the investment adjustment costs that are incurred when investing with uncertain cash flows. We also show that cash flow policies are affected by liquidity constraints following the 2008 financial crisis- firms build up more cash reserves from cash flows, cut back payouts and raise more debt to maintain cash holdings.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.sciedupress.com/journal/index.php/afr/article/download/10500/6459 (application/pdf)
https://www.sciedupress.com/journal/index.php/afr/article/view/10500 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jfr:afr111:v:5:y:2016:i:4:p:192

Access Statistics for this article

More articles in Accounting and Finance Research from Sciedu Press Contact information at EDIRC.
Bibliographic data for series maintained by Sciedu Press ().