Corporate governance, information disclosure and investment - Cash flow sensitivity

Er Yi

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: We investigate the impact of cash flow on investment spending under the scenarios of underinvestment and overinvestment and the moderating effect of corporate governance and information disclosure on the sensitivity of both. The empirical analysis is conducted by selecting listed companies in the manufacturing sector from 2013 to 2020. We find that companies investment is highly sensitive to cash flow under financing constraints and overinvestment due to agency costs. In the case of overinvestment, improving the level of disclosure significantly mitigates investment-cash flow sensitivity; in the case of underinvestment, improving corporate governance significantly reduces investment-cash flow sensitivity.

Keywords: Investment-cash flow sensitivity; Corporate governance; Information disclosure (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003148

DOI: 10.1016/j.frl.2023.103942

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