Investment-Cash Flow Sensitivities are Not Valid Measures of Financing Constraints
Steven N. Kaplan
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI)
NBER Working Paper No. w7659
Kaplan and Zingales  provide both theoretical arguments and empirical evidence that investment-cash flow sensitivities are not good indicators of financing constraints. Fazzari, Hubbard and Petersen  criticize those findings. In this note, we explain how the Fazzari et al.  criticisms are either very supportive of the claims in Kaplan and Zingales  or incorrect. We conclude with a discussion of unanswered questions.
Number of Pages in PDF File: 7working papers series
Date posted: May 17, 2000
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