Machokoto, M., Ibeji, N. and Chipeta, C. (2020) Investment-Cash Flow Sensitivity Around the Crisis: Are African Firms Different? International Journal of Managerial Finance. 1743-9132.
| Item Type: | Article |
|---|---|
| Abstract: | Purpose: This paper examines the contentious relationship between investment and cash flow using the 2008—09 credit supply shock as a form of quasi-natural experiment. Methodology: Panel threshold models with unknown sample separation are estimated for a sample of publicly listed firms from nine African countries over the period 2003— 2012. Using this approach reduces subjective or ex-ante sample splitting bias that is not accounted for in the extant literature. Findings: We show that investment-cash flow sensitivity is decreasing even during the Global Financial Crisis, and for firms more likely to be financially constrained. We conclude that the usefulness of investment-cash flow sensitivity as a proxy for financial constraints is diminishing over time, even after directly addressing biases from ex-ante subjective sample splitting and various forms of endogeneity. Originality: We provide new empirical evidence from sharper tests of financial con- straints for understudied African firms, and highlight the need to re-look at the usefulness of investment-cash flow sensitivity as a proxy of financial constraints. |
| Creators: | Machokoto, Michael, Ibeji, Ngozi and Chipeta, Chimwemwe |
| Faculties, Divisions and Institutes: | Faculties > Faculty of Business & Law > Accounting & Finance |
| Date: | 10 September 2020 |
| Date Type: | Acceptance |
| Journal or Publication Title: | International Journal of Managerial Finance |
| Number of Pages: | 41 |
| Language: | English |
| DOI: | https://doi.org/10.1108/IJMF-04-2020-0162 |
| ISSN: | 1743-9132 |
| Status: | Published / Disseminated |
| Refereed: | Yes |
| Related URLs: | |
| URI: | http://nectar.northampton.ac.uk/id/eprint/14715 |
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