Financial Development and Investment-Cash Flow Sensitivity

Jungwon Suh ()
Additional contact information
Jungwon Suh: Ewha Womans University

East Asian Economic Review, 2007, vol. 11, issue 1, 83-117

Abstract: Using firm-level data from thirty-five countries around the world, this paper empirically examines whether investment-cash flow sensitivity reflects financial constraints. Recent US studies have raised questions on the prediction that investment-cash flow sensitivity is a measure of financial constraints. Looking at thirty-five countries with varying degrees of financial development, this study tests whether investment-cash flow sensitivity is in fact related to financial constraints. In most countries, the evidence supporting the argument that firms likely facing financially constraints display high investment-cash flow sensitivity is weak. Moreover, the evidence that firms in the absence of developed financial markets display high investment-cash flow sensitivity is also weak. Overall, the results from this international investigation do not support the prediction that investment-cash flow sensitivity reflects financial constraints.

Keywords: Investment¡ⓒcash Flow Sensitivity; Financial Constraint; Financial Development (search for similar items in EconPapers)
JEL-codes: E22 E44 G31 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.11644/KIEP.JEAI.2007.11.1.165 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0155

Access Statistics for this article

East Asian Economic Review is currently edited by JE Lee

More articles in East Asian Economic Review from Korea Institute for International Economic Policy [30147] 3rd Floor Building C Sejong National Research Complex 370 Sicheong-daero Sejong-si, Korea. Contact information at EDIRC.
Bibliographic data for series maintained by JE Lee ().