Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis
International Monetary Fund (IMF); UCLA
October 20, 2011
24th Australasian Finance and Banking Conference 2011 Paper
Midwest Finance Association 2012 Annual Meetings Paper
This paper uses the financial crisis of 2008 as a natural experiment to demonstrate that when measuring investment-cash flow sensitivity, the value of a firm’s assets that can be used as collateral should be taken into account. Using panel data on U.S. firms from 1990 to 2011, it was found that the share of physical capital in assets has a strong influence on investment-cash flow sensitivity, which decreased substantially after the crisis when banks changed their expectations about the value of assets on firms’ balance sheets. This paper deepens our understanding of firms’ investment behavior.
Number of Pages in PDF File: 28
Keywords: Financial Crisis, Asymmetric Effects, Investment-Cash Flow Sensitivity
JEL Classification: G31, E22working papers series
Date posted: July 15, 2011 ; Last revised: March 31, 2012
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