Northampton Electronic Collection of Theses and Research

Decreasing Investment-cash flow Sensitivity: Further UK Evidence

Machokoto, M., Tanveer, U., Ishaq, S. and Areneke, G. (2021) Decreasing Investment-cash flow Sensitivity: Further UK Evidence. Finance Research Letters. 38 1544-6123.

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Machokoto_etal_Elsevier_2019_Decreasing_Investment_cash_flow_Sensitivity_Further_UK_Evidence
Machokoto_etal_Elsevier_2019_Decreasing_Investment_cash_flow_Sensitivity_Further_UK_Evidence.pdf - Accepted Version
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Abstract:
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.
Creators:
Machokoto, M., Tanveer, U., Ishaq, S. and Areneke, G.
Faculties, Divisions and Institutes:
Faculties > Faculty of Business & Law > Accounting & Finance
Date:
12 January 2021
Date Type:
Publication
Journal or Publication Title:
Finance Research Letters
Volume:
38
Number of Pages:
8
Language:
English
DOI:
10.1016/j.frl.2019.101397
ISSN:
1544-6123
Status:
Published / Disseminated
Refereed:
Yes
Related URLs:
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