Investment-Cash Flow Sensitivity and Financing Constraints: Study of Pakistani Business Group Firms

40 Pages Posted: 25 Oct 2019 Last revised: 18 Dec 2019

See all articles by Yasir Mehmood

Yasir Mehmood

COMSATS UNIVERSITY ABBOTTABAD

Syed Amjad Farid Hasnu

COMSATS Institute of Information Technology Abbottabad

Date Written: October 17, 2019

Abstract

A large discrepancy exists on the use of the investment–cash flow sensitivity as a measure of financing constraints of firms. We examine this discrepancy by considering business group affiliated firms in Pakistan. The study includes 58 group affiliated firms and 32 non-group affiliated firms listed on the Karachi Stock Exchange during 2006-2010. Results of OLS and 2SLS shows a positive investment-cash flow sensitivity for business group affiliated firms and negative investment cash flow sensitivity for non-group affiliated firms. Additional tests accordingly express that investment-cash flow sensitivity of Pakistani group affiliated firms is significantly lower to non-group affiliated firms.

Keywords: Investment-Cash flow, 2SLS, Financing constraints, Q model, Pakistani Business group Firms

JEL Classification: G1, G2, G3

Suggested Citation

Mehmood, Yasir and Farid Hasnu, Syed Amjad, Investment-Cash Flow Sensitivity and Financing Constraints: Study of Pakistani Business Group Firms (October 17, 2019). Available at SSRN: https://ssrn.com/abstract=3471042 or http://dx.doi.org/10.2139/ssrn.3471042

Yasir Mehmood (Contact Author)

COMSATS UNIVERSITY ABBOTTABAD ( email )

Khyber Pakhtunkhwa
Abbottabad, Khyber Pakhtun Khawa 22060
Pakistan

HOME PAGE: http://cuiatd.edu.pk/

Syed Amjad Farid Hasnu

COMSATS Institute of Information Technology Abbottabad

University Road Tobe Camp
Abbottabad, Khyber Pakhtun Khawa 22060
Pakistan

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