Investments, Financing Constraints and Buyouts: the Effect of Private Equity Investors on the Sensitivity of Investments to Cash Flow

Elisa Ughetto

Manchester School, 2016, vol. 84, issue 1, 25-54

Abstract: The paper examines the relationship between investments and cash flows for a panel of 206 low- and medium technology firms located in the UK, France, Italy and Spain, 108 of which underwent a buyout between 1997 and 2004. The results highlight that the sensitivity of investments to cash flows is increased when a buyout occurs, while investment levels do not seem to be affected after a buyout. However, differential effects emerge when considering the framework conditions in which investee firms operate and the typology and characteristics of investing funds.

Date: 2016
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