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Does cash flow affect investment? Evidence from the romanian capital market

Andriana Putintica () and Carmen Giorgiana Bonaci ()
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Andriana Putintica: Babes-Bolyai University, Cluj-Napoca, Faculty of Economics and Business Administration
Carmen Giorgiana Bonaci: Babes-Bolyai University, Cluj-Napoca, Faculty of Economics and Business Administration

International Journal of Entrepreneurial Knowledge, 2013, vol. 1, issue 1, 53-60

Abstract: Our paper addresses the relation between corporate investments and cash flow. While literature agrees upon the existence of a correlation between the two, its interpretation continues to generate intense debates. We use data from a sample of 125 Romanian listed companies for the 2005-2011 period. Using a fixed effects least squares model we document a positive significant association between investments and cash flow. The results show that a 1% cash flow fluctuation leads to a 0.27% alteration of the planned investments. We therefore add to the literature on a widely debated topic by bringing evidence in the case of Romanian listed companies.

Keywords: Investments; cash flow; financial reporting; panel data; fixed effects (search for similar items in EconPapers)
JEL-codes: M10 M40 G11 (search for similar items in EconPapers)
Date: 2013
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