Economics at your fingertips  

Investment and cash flow: evidence for asymmetries in European manufacturing

Konstantinos Drakos () and Christos Kallandranis ()

Applied Financial Economics, 2007, vol. 17, issue 14, 1191-1200

Abstract: An 'excess sensitivity' of investment to internal funds (cash flow) is typically interpreted as evidence for the presence of financing constraints. Building on this, we empirically investigate the possibility of an asymmetric response of investment to the availability of internal funds across expectation states. According to our results the impact of cash flow on investment spending is exacerbated during periods of 'pessimism'. Finally, allowing for both potential sources of asymmetries (across different states of expectations and the business cycle) our results indicate that both sources are significant, with the expectations-driven asymmetry being significantly deeper highlighting the paramount role of expectations.

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from

DOI: 10.1080/09603100600843890

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

Page updated 2022-08-28
Handle: RePEc:taf:apfiec:v:17:y:2007:i:14:p:1191-1200