Investment-Cash Flow Sensitivities Are Very Probably Not Valid Measures of Financing Constraints: on the Accounting Partial Identities Problem

2018 ◽  
Author(s):  
Javier Sánchez Vidal
Keyword(s):  
Cash Flow ◽  
Financing Constraints ◽  
Cash Flow Sensitivities

Investment and Cash Flow: New Evidence

2016 ◽  
Vol 51 (4) ◽  
pp. 1135-1164 ◽  
Author(s):  
Jonathan Lewellen ◽  
Katharina Lewellen
Keyword(s):  
Measurement Error ◽  
Cash Flow ◽  
Strong Evidence ◽  
Investment Decisions ◽  
Free Cash Flow ◽  
Financing Constraints ◽  
Flow Problems ◽  
Cash Flow Sensitivities ◽  
New Evidence

We study the investment–cash flow sensitivities of U.S. firms from 1971–2009. Our tests extend the literature in several key ways and provide strong evidence that cash flow explains investment beyond its correlation with q. A dollar of current- and prior-year cash flow is associated with $0.32 of additional investment for firms that are the least likely to be constrained and $0.63 of additional investment for firms that are the most likely to be constrained, even after correcting for measurement error in q. Our results suggest that financing constraints and free-cash-flow problems are important for investment decisions.

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
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