The effects of cash flow and size on the investment decisions of ICT firms: A dynamic approach

Dany Aoun and Junseok Hwang

Information Economics and Policy, 2008, vol. 20, issue 2, 120-134

Abstract: This paper examines one of the fastest growing industries in our world today, the ICT industry. We assess the sensitivity of a firm's investment to a set of financial determinants, by developing a flexible adjustment dynamic model. In particular, we examine the degree to which a firm's liquidity influences firm investment and whether firm size and firm specialization have any additional implications. Moreover, the effect of the dot-com burst is also considered. For a panel of ICT and non-ICT US companies listed on the NASDAQ stock exchange, the results reveal the following: (1) all firms are sensitive to the availability of internal funds; (2) investment intensity decreases with firm size; (3) and leverage negatively affects investment for ICT firms.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:20:y:2008:i:2:p:120-134

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