TY - JOUR
T1 - Decreasing Investment-cash flow Sensitivity: Further UK Evidence
AU - Machokoto, Michael
AU - Tanveer, Umair
AU - Ishaq, Shamaila
AU - Areneke, Geofry
PY - 2021/1/12
Y1 - 2021/1/12
N2 - Using publicly listed firms in the UK, we examine the time-series variation of investment-cash flow sensitivity after directly controlling for future growth opportunities in cash flow, which if overlooked, as in the literature, could bias inferences. We find that investment-cash flow sensitivity is disappearing over time, even for constrained firms during the global financial crisis when credit constraints were more significant or binding. Our results not only confirm the decline in investment-cash flow sensitivity that is not explained by factors so far identified in the literature but also its diminishing usefulness as a proxy of financial constraints.
AB - Using publicly listed firms in the UK, we examine the time-series variation of investment-cash flow sensitivity after directly controlling for future growth opportunities in cash flow, which if overlooked, as in the literature, could bias inferences. We find that investment-cash flow sensitivity is disappearing over time, even for constrained firms during the global financial crisis when credit constraints were more significant or binding. Our results not only confirm the decline in investment-cash flow sensitivity that is not explained by factors so far identified in the literature but also its diminishing usefulness as a proxy of financial constraints.
UR - http://www.mendeley.com/research/decreasing-investmentcash-flow-sensitivity-further-uk-evidence
U2 - 10.1016/j.frl.2019.101397
DO - 10.1016/j.frl.2019.101397
M3 - Article
SN - 1544-6123
VL - 38
JO - Finance Research Letters
JF - Finance Research Letters
M1 - 101397
ER -