Global cash flow sensitivities
Malte Janzen and
Finance Research Letters, 2018, vol. 25, issue C, 16-22
We examine the role of a country's institutional framework for investment and financing activities. A country's financial structure, investor rights, and legal environment are important determinants of the relation between cash flow and firms’ investment and financing behavior. Firms from countries with a stronger institutional framework exhibit higher financing-cash flow sensitivities. These firms are more likely to substitute a cash flow shortfall with issuing equity. Conversely, investment-cash flow sensitivities are higher for firms in countries with a weaker institutional framework.
Keywords: Cash flow sensitivity; Financial development; Law and finance (search for similar items in EconPapers)
JEL-codes: G20 G31 G38 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:25:y:2018:i:c:p:16-22
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