Do financing constraints hinder corporate fixed investment? Evidence from the Amman stock exchange

Mohammad A. Khataybeh

Cogent Business & Management, 2021, vol. 8, issue 1, 1910161

Abstract: This research provides new evidence on financing constraints on corporate fixed investment by emphasizing the role of cash holdings as a precautionary source of funds. Applying GMM estimates to a sample of 106 Jordanian firms, the results suggest that firms follow trade-off theory in financing their investments but are financially constrained. The coefficient of the cash holdings variable appears to be negative in the fixed-investment regression, suggesting that when firms face financing shocks, they draw upon their precautionary cash reserves to smooth the path of their expenditure on fixed assets.

Date: 2021
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DOI: 10.1080/23311975.2021.1910161

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