Asymmetric Effects of the Financial Crisis PDF Download

Author: Armen Hovakimian
Publisher:
ISBN:
Category :
Languages : en
Pages : 35

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Book Description
Investment cash flow sensitivity is associated with both undervestment when cash flows are low and overinvestment when cash flows are high. The accessibility of external capital is positively correlated with cash flows, intensifying investment cash flow sensitivity. Managers actively counteract the variations in internal and external liquidity by accumulating working capital when liquidity is high and draining it when liquidity is low. These results imply that cash flow sensitive firms face financial constraints, which are binding in low cash flow years. While financial constraints have an economically significant impact on investment timing, cash flow sensitive firms alleviate their effects and, actually, overinvest, on aggregate.

Author: Mr.Vadim Khramov
Publisher: International Monetary Fund
ISBN: 1475502877
Category : Business & Economics
Languages : en
Pages : 28

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Book Description
This paper uses the financial crisis of 2008 as a natural experiment to demonstrate that when measuring investment-cash flow sensitivity, the value of a firm's assets that can be used as collateral should be taken into account. Using panel data on U.S. firms from 1990 to 2011, it was found that the share of physical capital in assets has a strong influence on investment-cash flow sensitivity, which decreased substantially after the crisis when banks changed their expectations about the value of assets on firms' balance sheets. This paper deepens our understanding of firms' investment behavior.

Author: Gayané Hovakimian
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

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Book Description
Using firm-level estimates of investment-cash flow sensitivity, I classify firms into groups of high, low, and negative sensitivity. I find that investment-cash flow sensitivity is non-monotonic with respect to financial constraints, cash flows, and growth opportunities. Specifically, firms with negative cash flow sensitivity have the lowest cash flows and highest growth opportunities, and appear the most financially constrained. Cash flow insensitive firms have the highest cash flows and lowest growth opportunities, and appear the least financially constrained. At least partially, negative cash flow sensitivity is driven by high investment and low cash flow levels at the inception of firms as public companies, which decrease and increase, respectively, with age.

Author: Xueping Wu
Publisher:
ISBN:
Category :
Languages : en
Pages : 53

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Book Description
We find the investment-cash-flow-sensitivity (ICFS) decreases with a firm's asymmetric informational imperfection about growth (AI), a variable highly persistent over time. Firms with distinctly initial AI have distinct future investment styles and financing patterns. Higher initial AI predicts an investment style with more R&D intensity and a financing pattern with more equity than debt. Types of asymmetric information (about growth vs. assets-in-place) affect external finance so that growth uncertainty appears to facilitate rather than suppress equity financing. These findings are consistent with a growth-type explanation for ICFS and do not support the proposition that informational imperfection generally imposes financial constraints.

Author:
Publisher: World Bank Publications
ISBN:
Category : Corporations
Languages : en
Pages : 36

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Author: Mohamed A. Ramady
Publisher: Springer Science & Business Media
ISBN: 1441959874
Category : Business & Economics
Languages : en
Pages : 516

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Book Description
The Saudi Arabian economy has changed almost beyond recognition since the oil boom days of the 1980s, and the Kingdom itself has changed too economically, socially, and demographically. In the second edition of The Saudi Arabian Economy, Mohamed Ramady uses several overlapping themes to establish and develop a framework for studying the fundamental challenges to the Saudi economy. Particular attention is paid to the benefits of short-term planning and long-term diversification intended to shield the economy from potentially de-stabilizing oil price fluctuations and the pace and diversity of domestic reforms. The author examines the core strengths and evolution of various financial institutions and the Saudi stock market in the face of globalization, before analyzing the private sector in detail. Topics discussed include: • The hydrocarbon and minerals sector, including the emergence of the competitive petrochemical sector • The impact of small and medium sized businesses and the evolving role of “family” businesses • The growing role of women in the Saudi economy • The role of privatization and FDI as engines of change and the position of public-private-partnerships • The establishment of a foundation for a knowledge-based economy Finally, the author offers an analysis of the key challenges facing the Saudi economy, paying particular attention to the potential costs and benefits of globalization, and membership in the WTO. Employment, education, economic and social stability, and Saudi Arabia’s place in the Gulf Cooperation Council, as well as Saudi Arabia’s evolving strategic economic relations with China and other countries are offered as keys to the consensus building needed to ensure the Kingdom’s healthy economic future.

Author: Mr.R. Gelos
Publisher: International Monetary Fund
ISBN: 1451844247
Category : Business & Economics
Languages : en
Pages : 42

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This paper examines the impact of financial liberalization on fixed investment in Mexico, using establishment-level data from the manufacturing sector. It analyzes changes in cash-flow sensitivities and uses an innovative approach to explore the role of real estate as collateral and deal with a potential censoring problem. The results suggest that financial constraints were eased for small firms but not for large ones. However, banks’ reliance on collateral in their lending operations increased the importance of real estate. The results provide microeconomic evidence consistent with the role attributed to “financial accelerator” mechanisms during lending booms and during recessions that stem from financial crises.

Author: Huafeng (Jason) Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 49

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Book Description
Investment-cash flow sensitivity has declined and disappeared, even during the 2007-2009 credit crunch. If one believes that financial constraints have not disappeared, then investment-cash flow sensitivity cannot be a good measure of financial constraints. The decline and disappearance are robust to considerations of Ramp;D and cash reserves, and across groups of firms. The information content in cash flow regarding investment opportunities has declined, but measurement error in Tobin's q does not completely explain the patterns in investment-cash flow sensitivity. The decline and disappearance cannot be explained by changes in sample composition, corporate governance, or market power; and remain a puzzle.

Author: Rejie George
Publisher:
ISBN:
Category :
Languages : en
Pages : 42

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Book Description
A controversy exists on the use of the investment ndash; cash flow sensitivity as a measure of financing constraints of firms. We re-examine this controversy by analyzing firms affiliated to Indian business groups. We find a strong investment ndash; cash flow sensitivity for both group-affiliated and independent firms, but no significant difference in the sensitivity between them. Additional tests consistently demonstrate that investment ndash; cash flow sensitivity of Indian group affiliated firms is not significantly lower relative to unaffiliated firms.

Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :

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