This study aimed to investigate the investment-cash flow sensitivity for
Brazilian companies with different degrees of financial constraint according
to the quality level of their corporate governance practices. An investment
model was estimated through GMM for a panel data of 248 Brazilian publicly
traded companies, which were a priori classified in two groups of financial
constraint degrees (high and low) according to the Corporate Governance
Practices Index (IPGC). The results showed that the quality of corporate
governance influences the investment-cash flow sensitivity, and this
sensitivity is negative and significant only for firms with poor governance,
classified with high financial constraint. Furthermore, it can be concluded
that IPGC proved to be an interesting variable for a priori classification
of companies and an important determinant of the investment-cash flow
sensitivity to identify potentially financially constrained firms.