Decreasing Investment-cash flow Sensitivity: Further UK Evidence

Michael Machokoto*, Umair Tanveer, Shamaila Ishaq, Geofry Areneke

*Corresponding author for this work

Research output: Contribution to JournalArticlepeer-review


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.
Original languageEnglish
Article number101397
Number of pages8
JournalFinance Research Letters
Early online date12 Dec 2019
Publication statusPublished - 12 Jan 2021


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