Financial Constraints and Investment-Cash Flow Sensitivity

32 Pages Posted: 23 Feb 2002

See all articles by Zhangkai Huang

Zhangkai Huang

affiliation not provided to SSRN

Date Written: February 2002

Abstract

Using a large sample of US listed companies, we show that the relation between financial constraints and investment-cash flow sensitivity is non-linear. The different results generated in previous studies could be explained by sample selection problems. We show that when using actual level of investment in the regression, as in the standard investment literature, coefficient on cash flow cannot be an accurate measure of financial constraints. The monotonic and positive relationship between financial constraints and investment-cash flow sensitivity is not robust in large-sample studies using detailed classification scheme.

Keywords: Capital Market Imperfection, Financial Constraints, Investment-Cash Flow Sensitivity

JEL Classification: D21, G30, G31

Suggested Citation

Huang, Zhangkai Samuel, Financial Constraints and Investment-Cash Flow Sensitivity (February 2002). EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: https://ssrn.com/abstract=301580 or http://dx.doi.org/10.2139/ssrn.301580

Zhangkai Samuel Huang (Contact Author)

affiliation not provided to SSRN

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