Investment-Cash Flow Sensitivities Are Very Probably Not Valid Measures of Financing Constraints PDF Download
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Author: Javier Sánchez Vidal Publisher: ISBN: Category : Languages : en Pages : 22
Book Description
This experiment uses a Monte Carlo simulation designed to test whether the problems about the use of accounting identities are present in the model of Fazzari, Hubbard, and Petersen (1988). The Monte Carlo simulation creates 10,000 sets of randomly generated cash flows, Tobin's Q, and an error term variables, which in turn shape an investments variable that depends on them. These two variables are also related through an accounting semi identity or accounting partial identity (API). OLS estimations verify that estimated coefficients do not represent reality. The closer the data are to the accounting identity, the less the regression will tell about the causal relation.
Author: Javier Sánchez Vidal Publisher: ISBN: Category : Languages : en Pages : 22
Book Description
This experiment uses a Monte Carlo simulation designed to test whether the problems about the use of accounting identities are present in the model of Fazzari, Hubbard, and Petersen (1988). The Monte Carlo simulation creates 10,000 sets of randomly generated cash flows, Tobin's Q, and an error term variables, which in turn shape an investments variable that depends on them. These two variables are also related through an accounting semi identity or accounting partial identity (API). OLS estimations verify that estimated coefficients do not represent reality. The closer the data are to the accounting identity, the less the regression will tell about the causal relation.
Author: Steven N. Kaplan Publisher: ISBN: Category : Cash flow Languages : en Pages : 24
Book Description
Kaplan and Zingales [1997] provide both theoretical arguments and empirical evidence that investment-cash flow sensitivities are not good indicators of financing constraints. Fazzari, Hubbard and Petersen [1999] criticize those findings. In this note, we explain how the Fazzari et al. [1999] criticisms are either very supportive of the claims in Kaplan and Zingales [1997] or incorrect. We conclude with a discussion of unanswered questions.
Author: Robert M. Bushman Publisher: ISBN: Category : Languages : en Pages : 52
Book Description
An important, unresolved issue in finance is whether the sensitivity of capital investment to internally generated cash flows reflects the impact of binding financing constraints on firms' investment decisions. We contribute new insight to this debate by providing systematic evidence that investment-cash flow sensitivity (ICFS) primarily reflects the fundamental connection between capital investment and working capital investment as interrelated manifestations of firm growth. We decompose the cash flow measure used in the literature, earnings before depreciation (EBD), into cash flow from operations (CFO), and working capital accruals (WCACC) which reflects net investment in working capital items like inventory and accounts receivable. We demonstrate that ICFS is driven by the natural co-movement between fixed investment and the working capital investment aspect of WCACC as complementary factors of production. In contrast, investment-CFO sensitivity is often negative and tends to decrease as financing constraints increase, inconsistent with CFO serving as a source of investment financing for constrained firms. What does this growth interpretation imply about the connection between ICFS and financing constraints? We argue that the nature of ICFS depends directly on the underlying catalyst of firm growth. If investment is driven solely by a reduction in the cost wedge between external and internal financing, ICFS reflects the investment consequences of this reduction in financing constraints. However, if capacity expansion is instead driven by macro shifts in the opportunity cost of firms' internal funds, shocks in investment opportunities, empire building behavior, or managerial irrationality, ICFS will not reflect financing frictions but rather the natural consequence of capacity expansion on the co-movement of fixed and working capital investment.
Author: Helena Hannula Publisher: Ashgate Publishing, Ltd. ISBN: 9780754645610 Category : Business & Economics Languages : en Pages : 400
Book Description
Estonia is regarded by many as one of the most hopeful cases for the integration of eastern Europe into the enlarged European Union. It provides positive examples of how the integration process can be well handled, but at the same time some of the contentious issues this can give rise to. This book assesses the tensions involved in the development of the Estonian economy in terms of growth, convergence, financial development, labour reallocation, structural and organizational change, and the role of foreign companies and international networks. The analysis of Estonia is placed within a broader context and among a wider set of nations, and thus aims at understanding the potential for growth and structural change in the eastern part of the enlarged EU. In these and related fields, the book seeks to draw lessons from Estonia for other new (and indeed future) EU accession countries.
Author: Kose John Publisher: Emerald Group Publishing ISBN: 0857249150 Category : Business & Economics Languages : en Pages : 210
Book Description
Presents research on corporate governance from a number of countries across the world, including the United States, Spain, Malaysia, Israel and others. This title examines many important corporate governance mechanisms, such as board characteristics, ownership structure, legal protection of shareholders, and annual general meetings.
Author: Javier Sánchez Vidal
Author: Javier Sánchez Vidal
Author: Steven N. Kaplan
Author: Robert M. Bushman
Author: 
Author: Guiying Wu
Author: Steven N. Kaplan
Author: 
Author: Stephen R. Bond
Author: Helena Hannula
Author: Kose John