Investment - Cash Flow Sensitivity and Financing Constraints: New Evidence from Indian Business Group Firms
42 Pages Posted: 16 Mar 2005 Last revised: 1 Aug 2012
Date Written: February 1, 2010
Abstract
A controversy exists on the use of the investment – cash flow sensitivity as a measure of financing constraints of firms. We re-examine this controversy by analyzing firms affiliated to Indian business groups. We find a strong investment – cash flow sensitivity for both group-affiliated and independent firms, but no significant difference in the sensitivity between them. Additional tests consistently demonstrate that investment – cash flow sensitivity of Indian group affiliated firms is not significantly lower relative to unaffiliated firms.
Keywords: investment, cash flows, business groups, financing constraints, India
JEL Classification: G30, G31, L20
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Financing Constraints and Corporate Investment
By Steven M. Fazzari, Bruce C. Petersen, ...
-
Measurement Error and the Relationship between Investment and Q
By Timothy Erickson and Toni M. Whited
-
Inflation, Taxation, and Corporate Investment: A Q-Theory Approach
-
The Stock Market, Profit and Investment
By Olivier J. Blanchard, Changyong Rhee, ...
-
Investment-Cash Flow Sensitivities are Not Valid Measures of Financing Constraints
By Steven N. Kaplan and Luigi Zingales
-
The Present Value of Profits and Cyclical Movements in Investment
