Does macro-economy have any effect on firm investment-cash flow sensitivities? —An empirical study based on panel data, 1993–2004

Weiwei Ying ()
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Weiwei Ying: School of International Business, Beijing Foreign Studies University, Beijing 100089, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2007, vol. 2, issue 3, 388-403

Abstract: We conduct an empirical study on Chinese listed firms' investment-cash flow sensitivities in different stages of the macroeconomic cycle during 1993–2004, and find that macro-economy has a significant effect on investment-cash flow sensitivities. When economic slowdown occurred between 1998 and 2001, sample firms reduced working capital substantially to maintain some necessary investment level of fixed assets, that is, firms stabilized fixed assets investment by adjusting working capital. However, the sensitivity coefficients of fixed assets investment to cash or sales revenue were not systematically higher in the depressed stage than in the booming stage.

Keywords: macro-economy; investment-cash flow sensitivities; panel data (search for similar items in EconPapers)
JEL-codes: E22 (search for similar items in EconPapers)
Date: 2007
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