Financial Development and the Cash Flow Sensitivity of Cash PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Financial Development and the Cash Flow Sensitivity of Cash PDF full book. Access full book title Financial Development and the Cash Flow Sensitivity of Cash by Inder K. Khurana. Download full books in PDF and EPUB format.
Author: Inder K. Khurana Publisher: ISBN: Category : Languages : en Pages : 38
Book Description
Prior research has posited that market imperfections and the lack of institutions which protect investor interests create a divergence between the cost of internal and external funds, thereby constraining firms' ability to fund investment projects through external financing. One consequence of financial constraints is that it forces firms to manage their cash flows to finance potentially profitable projects. A related stream of research documents that financial constraints due to costly external financing are more pronounced in underdeveloped financial markets. In this paper we examine the influence of financial development on the demand for liquidity by focusing on how financial development affects the sensitivity of firms' cash holdings to their cash flows. Using firm-level data for 35 countries covering about 12,782 firms for the years 1994-2002, we find the sensitivity of cash holdings to cash flows decreases with financial development. We also consider additional implications of firms' cash flow sensitivity of cash with respect to firm size and business cycles. Overall, we provide new cross-country evidence on the role of financial development on financial constraints.
Author: Heitor Almeida Publisher: ISBN: Category : Languages : en Pages : 34
Book Description
We use the link between financial constraints and a firm's demand for liquidity to develop a new test of the effect of financial constraints on firm policies. The effect of financial constraints can be captured by a firm's propensity to save cash out of incremental cash inflows (the quot;cash flow sensitivity of cashquot;). While constrained firms should have a positive cash flow sensitivity of cash, unconstrained firms' cash savings should not be systematically related to cash flows. We estimate the cash flow sensitivity of cash using a large sample of manufacturing firms over the 1971-2000 period and find that firms that are more likely to be financially constrained display a significantly positive cash flow sensitivity of cash, while unconstrained firms do not. Also consistent with our argument, we find that constrained firms' cash flow sensitivity of cash increases during recessions, while unconstrained firms' cash--cash flow sensitivity is unaffected by macroeconomic innovations. The use of cash flow sensitivities of cash appears to be a theoretically justified, empirically useful method to test for the importance of financial constraints.
Author: Inder K. Khurana Publisher: ISBN: Category : Languages : en Pages : 38
Book Description
Prior research has posited that market imperfections and the lack of institutions which protect investor interests create a divergence between the cost of internal and external funds, thereby constraining firms' ability to fund investment projects through external financing. One consequence of financial constraints is that it forces firms to manage their cash flows to finance potentially profitable projects. A related stream of research documents that financial constraints due to costly external financing are more pronounced in underdeveloped financial markets. In this paper we examine the influence of financial development on the demand for liquidity by focusing on how financial development affects the sensitivity of firms' cash holdings to their cash flows. Using firm-level data for 35 countries covering about 12,782 firms for the years 1994-2002, we find the sensitivity of cash holdings to cash flows decreases with financial development. We also consider additional implications of firms' cash flow sensitivity of cash with respect to firm size and business cycles. Overall, we provide new cross-country evidence on the role of financial development on financial constraints.
Author: Justin Cox Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
Almeida, Campello, and Weisbach (2004) show that cash flow sensitivities are higher for firms that are financially constrained. This paper updates and extends the work of Almeida, Campello, and Weisbach to account for possible misspecification of financial constraints as well as changes in firm and industry characteristics. Using an updated sample period along with new measurements of financial constraints, I show that the schemes originally provided to measure firms as financially constrained are subject to misspecification in the original sample period. However, in employing the same methodology to a contemporary sample period, the results support ACW. I also investigate whether these classification schemes as well other contemporary classification schemes of financial constraint hold up using a sample of non-manufacturing firms. Overall, the results are consistent with Chen and Chen (2012), in that the overall cash-flow sensitivity has declined over the years for both manufacturing and non-manufacturing firms.
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: Gayané Hovakimian Publisher: ISBN: Category : Languages : en Pages : 41
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: Mauricio Jara-Bertin Publisher: ISBN: Category : Languages : en Pages : 42
Book Description
We examine the effects of internal capital markets on the propensity of firms to save cash from cash flows (i.e., the cash flow sensitivity of cash). We argue that firms that are net providers of funds to related parties must maintain a higher cash flow sensitivity of cash to prevent high levels of pressure on their cash holdings in contrast to net receivers of intra-holding funds. Based on a panel of listed firms in Chile, we test this premise and examine how a firm's differences in accounts receivable and accounts payable from related companies affects its cash flow sensitivity of cash. The results confirm that firms with high levels of net loans to related companies have higher cash flow sensitivities of cash and that this relationship is strongest for firms affiliated with business groups and family-owned firms. Furthermore, providers of funds that have the propensity for high savings are those firms that are more financially constrained suggesting that the cash flow sensitivity of cash is an adequate indicator to capture financing constraints.
Author: Armen Hovakimian Publisher: ISBN: Category : Languages : en Pages : 35
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: Raymond Fisman Publisher: World Bank Publications ISBN: Category : Credit Languages : en Pages : 34
Book Description
Where do firms turn for financing in countries with poorly developed financial markets? One source is trade credit. And where formal financial intermediaries are deficient, industries that rely more on this source of financing grow faster.
Author: Mr.R. Gelos Publisher: International Monetary Fund ISBN: 1451844247 Category : Business & Economics Languages : en Pages : 42
Book Description
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: Inder K. Khurana
Author: Heitor Almeida
Author: Inder K. Khurana
Author: Justin Cox
Author: Kose John
Author: Gayané Hovakimian
Author: Mauricio Jara-Bertin
Author: Armen Hovakimian
Author: Raymond Fisman
Author: Heitor Almeida
Author: Mr.R. Gelos