How Do Firms Allocate Internal Cash Flow? The Effect of Misvaluation and Costly External Financing

2011 ◽  
Author(s):  
Xin Chang ◽  
Sudipto Dasgupta ◽  
George Wong
Keyword(s):  
Cash Flow ◽  
External Financing ◽  
Internal Cash Flow

scholarly journals Cash-Flow Sensitivities and the Allocation of Internal Cash Flow

2014 ◽  
Vol 27 (12) ◽  
pp. 3628-3657 ◽  
Author(s):  
Xin Chang ◽  
Sudipto Dasgupta ◽  
George Wong ◽  
Jiaquan Yao
Keyword(s):  
Cash Flow ◽  
Cash Flow Sensitivities ◽  
Internal Cash Flow

scholarly journals THE EFFECT OF FINANCIAL CONSTRAINT MODERATION IN CASH FLOW SENSITIVITY TO EXTERNAL FINANCING OF MANUFACTURING COMPANIES

2020 ◽  
Vol 10 (1) ◽  
pp. 65
Author(s):  
Abu Hasan Ahmad ◽  
Maria Adventia Mentari Mayang Cardicna
Keyword(s):  
Cash Flow ◽  
Stock Exchange ◽  
Order Theory ◽  
Debt Financing ◽  
Financial Constraint ◽  
External Financing ◽  
Manufacturing Companies ◽  
Short Term ◽  
Flow Sensitivity ◽  
Cash Flow Sensitivity

This study aims to test the pecking order theory by looking at the level of cash flow sensitivity as a source of internal financing for all types of external financing (debt and equity). This testing also considering the financial constraint variable as moderation. The data used are the financial statements of manufacturing companies listed on the Indonesia Stock Exchange in 2014 - 2018. The dependent variable is all types of external financing (debt and equity). Debt financing is divided into two forms, short-term debt financing and long-term debt financing. While the independent variable is cash flow. The results obtained is that cash flow does not substitute all types of external financing, and the highest cash flow sensitivity occurs in short-term debt financing. The next result is that financial constraint strengthen the sensitivity of cash flow to debt and equity financing

The Sensitive Dynamic Study of Business Investment Decision-Making on Cash Flow

2011 ◽  
Vol 403-408 ◽  
pp. 394-399
Author(s):  
Zhe Fan Piao ◽  
Mei Rong Ni
Keyword(s):  
Cash Flow ◽  
Factor Model ◽  
Investment Decision ◽  
External Financing ◽  
Manufacturing Companies ◽  
Flow Sensitivity ◽  
Investment Decision Making ◽  
Cash Flow Sensitivity ◽  
Euler Model ◽  
Financial Market Development

This study bases on investment - cash flow related theories and Euler model, references to the research of Forbes(2003) and Jaewoon Koo(2005), exports investment- cash flow sensitivity and impact factor model , makes 77 of China's listed manufacturing companies as a sample, uses the empirical to analyze (I/K)i,t-1,(S/K)i,t, (CF/K)i,t, and also to analyze whether external financing , corporate nature (whether are state-owned enterprises), the degree of financial market development, the period around the financial crisis, the effect (fi+d)thave an impact on investment - cash flow. The empirical results show that although China's listed companies as a whole show a strong investment - cash flow sensitivity, this phenomenon is not just caused by financing constraints, trade-off theory or agency problems, but by the type of the company.

scholarly journals DEFISIT VS SURPLUS FINANSIAL DAN KETERKAITANNYA DENGAN STRUKTUR MODAL

2018 ◽  
Vol 2 (1) ◽  
pp. 204
Author(s):  
Ida Puspitowati ◽  
Kartika Nuringsih ◽  
Rita Amelinda
Keyword(s):  
Cash Flow ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Internal Cash Flow

Keputusan pendanaan merupakan kombinasi pendanaan jangka panjang dan jangka pendek dengan mempertimbangkan kemampuan membayar biaya modal kepada investor. Salah satu faktor dipertimbangkan sebelum menambah sumber dana adalah kondisi defisit vs surplus finansial sehingga tujuan riset mengekplorasi kondisi tersebut serta keterkaitanya dengan perubahan struktur utang. Pertama mengidentifikasi kondisi defisit vc surplus finansial berdasarkan pembayaran dividen, investasi jangka panjang, modal kerja bersih dan internal cash flow. Kedua membandingkan jumlah rata-rata penambahan utang jangka panjang antara kondisi surplus dengan deficit. Ketiga menguji efek indikator serta kondisi defisit financial terhadap perubahan utang. Dilakukan observasi 292 sektor manufaktur terdaftar di BEI periode 2008-2013 dengan hasil yaitu: (1) Terdapat perbedaan rata-rata perubahan utang jangka panjang antara deficit dengan surplus keuangan, (2) Terdapat pengaruh signifikan 1% diantara indikator deficit keuangan terhadap perubahan utang. (3) Deficit financial berpengaruh positif signifikan 1% terhadap perubahan utang. Hasil mengidentifikasi pentingnya deteksi kondisi financial untuk memonitor perubahan struktur utang. Terakhir, disimpulkan bahwa strategi pendanaan belum sepenuhnya menganut pecking order theory, melainkan terjadi kombinasi dengan trade off models.

scholarly journals Financial and Operating Working Capital: Unraveling Obscured Portion of Balance Sheet

2020 ◽  
Vol 6 (2) ◽  
Author(s):  
Kashif Saeed ◽  
Areeba Khan
Keyword(s):  
Cash Flow ◽  
Business Performance ◽  
Stock Exchange ◽  
Balance Sheet ◽  
Secondary Data ◽  
Annual Reports ◽  
Working Capital ◽  
Cash Conversion Cycle ◽  
Internal Cash Flow ◽  
Business Practitioners

ABSTRACT Purpose- The purpose of this study is to provide a new obscured aspect of financial working capital in working capital management, and investigate the association between financial and operating working capital with business performance. This paper also examines the interacting effect of net cash flow on this relationship. The current study introduces a modification in cash conversion cycle (CCC) by taking concealed trade advance payments. Design/methodology/approach- This study employs fixed effect regression model, covering a sample of Automobile sector companies, listed at Pakistan Stock Exchange (PSX) for the period of fourteen years from 2005 to 2018. Secondary data is collected from companies’ financial annual reports, PSX website, and Balance sheet analysis of State Bank of Pakistan (SBP). The study is explanatory and deductive in nature. Financial working capital (FWC) and new measure of operating working capital (OWC) i.e. modified cash conversion cycle (mCCC) is introduced & empirically tested with 252 firm-year observations. Findings- The regression results shows, a convex association between OWC & FWC, with business performance, in dearth of internal cash. However, after taking interacting effect of internal availability of cash, only FWC relation has become concave. The result also shows that mCCC provides a more realistic view of OWC. Research limitations/implications- This study has considered, concealed trade prepayments only, further research could include other components in mCCC. Moreover micro, macro factors and status of the economy such as depression or boom may also affect the results of the research. The findings suggest that managers should separately deal operating & financial working capital. Firms’ performance can be enhanced, if Finance Manager Take account internal cash of the firm. In case of deficiency (sufficiency) of it, he should work to decrease (increase) the investment amount in operating working capital (financial working capital). Overall, the results will be helpful to the financial experts and business practitioner in analyzing, and utilization of their resources. Originality/value- This study adds a new dimension in working capital by separating it into operating and financial working capital.  The study also offers insights into the new knowledge of extension in CCC, role of concealed advance payments and internal cash flow, for class teachers and business practitioners. It will also describe the new avenues for further research in this field.    Key Words:  Financial working capital, Operating working capital, Trade advanced payments and modified cash conversion cycle (mCCC).

scholarly journals Financial Constraints and Financial Crises: The Case of Portuguese Listed Companies

2018 ◽  
Vol 9 (2) ◽  
pp. 64
Author(s):  
Luísa Pereira ◽  
Armando Silva ◽  
Sónia Nogueira Silva
Keyword(s):  
Panel Data ◽  
Financial Crisis ◽  
Cash Flow ◽  
Financial Constraints ◽  
External Financing ◽  
General Index ◽  
Efficient Measure ◽  
Final Sample ◽  
Recent Financial Crisis ◽  
Higher Sensitivity

The purpose of this study is to analyze the degree of financial constraints faced by the companies included on the Portuguese Stock General Index when accessing to external financing, especially after the beginning and during the most recent financial crisis that affected the world financial markets from 2007. According to this aim, a longitudinal database is collected from the SABI database and was analyzed under panel data methodology. The final sample is panel data of 430 firm-year observations, related to 43 companies, during the period 2006-2015.In line with previous literature, our results provide evidence that the payout ratio is an efficient measure of the degree of financial constraints; companies that pay out less (or no) dividends display higher sensitivity of the investment to the cash flow. Moreover, we also found that the investment sensitivity to cash flow intensifies immediately after and during the most recent financial crisis.

scholarly journals Monetary Policy, Cash Flow and Corporate Investment: Empirical Evidence from Vietnam

2019 ◽  
Vol 12 (1) ◽  
pp. 46 ◽  
Author(s):  
Linh My Tran ◽  
Chi Mai ◽  
Phuoc Huu Le ◽  
Chi Bui ◽  
Linh Nguyen ◽  
...  
Keyword(s):  
Monetary Policy ◽  
Cash Flow ◽  
Corporate Investment ◽  
Cash Flows ◽  
Sustainable Growth ◽  
Corporate Investments ◽  
Monetary Policies ◽  
Financial Firms ◽  
Internal Cash Flow ◽  
Flow Effects

This paper examines the relationships between macroscopic determinants (typically, monetary policies) and microscopic factors (mainly, cash flows and other controlling variables) on corporate investment. By employing system-GMM estimation for the 250 Vietnamese non-financial firms, the authors find that the expansionary monetary policy not only encourages the borrowing activities but also results in more corporate investment activities over the period from 2006 to 2016. Noticeably, the internal cash flow is also significant factor, which enhances the activities of corporate investment. Finally, there are differences between internal cash flow effects on corporate investments between two groups, divided by three theoretical criteria. To recapitulate, our implications highlight the importance of monetary policy stability for sustainable growth in corporate investment in Vietnam.

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