Investment Cash Flow Sensitivity as a Measure of Financing Constraints: Evidence from Selected African Countries

Letenah Ejigu Wale

Journal of Economics and Behavioral Studies, 2014, vol. 6, issue 8, 647-657

Abstract: The use of investment cash flow sensitivity as a measure of financing constraints is an unresolved research agenda. This paper endeavors to explain the conflicting evidence by using proxies for both internal financial constraint and external financial constraint measures. Data is taken from selected six African countries, a region where no previous studies are conducted. It is observed that the investment curve is Ushaped when firms are classified on the basis of internal financial constraint measure (i.e. cash flow). Using external financial constraint proxies (age, size and payout) it is found that all category of firms show positive and significant investment cash flow sensitivity. This suggests that the sampled African firms are externally financial constrained. It is concluded that the way firms are a priori classified as internal vs. external financial constrained matters. This raises the issue of whether the term financial constraints itself is a multidimensional construct.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ojs.amhinternational.com/index.php/jebs/article/view/525/525 (application/pdf)
https://ojs.amhinternational.com/index.php/jebs/article/view/525 (text/html)

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:rnd:arjebs:v:6:y:2014:i:8:p:647-657

DOI: 10.22610/jebs.v6i8.525

Access Statistics for this article

More articles in Journal of Economics and Behavioral Studies from AMH International
Bibliographic data for series maintained by Muhammad Tayyab ().