 Corporate Investments and Financing Constraints: Analyzing Firm-Varying Investment Cash Flow SensitivitiesB. D'espallier, S. Vandemaele and L. Peeters Review of Business and Economic Literature, 2009, vol. 54, issue 4, 461-489 Abstract: Recent studies in corporate finance estimate firm-varying investment-cash flow sensitivities (ICFS) when empirically studying financing constraints. We go along with this approach but suggest two methodological improvements. First, we estimate firm-varying ICFS by modeling heterogeneous slopes in the investment equation thereby taking into account the dynamics of the underlying investment model. Secondly, we study the drivers of ICFS in an ex-post regression-analysis thereby accounting for non-linear effects and ‘ceteris-paribus’-conditions. The results show that the firm’s ICFS is negatively related to size, dividend payout, profitability, and positively related to leverage suggesting a tight link between ICFS and the firm’s constraints-status. Additionally, ICFS is negatively related to the level and volatility of cash flow, 5suggesting that a significant ICFS occurs mainly in low cash flow-states and can be lowered by the practice of cash-buffering. Finally, we find evidence of a non-linear tangibility-effect in line with the non-monotonic credit multiplier. Date: 2009 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sen:rebelj:v:54:i:4:y:2009:p:461-489 Access Statistics for this article Review of Business and Economic Literature is currently edited by Hans Kluwer More articles in Review of Business and Economic Literature from Intersentia |
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