This paper examines whether the phenomenon of disappearing investment-cash flow sensitivity is unique to the U.S. market. We find that in aggregate, investment-cash flow sensitivity has also declined around the world, yet there exists a substantial cross-country variation. Specifically, investment-cash flow sensitivity has remained high in countries with low GDP per capita, less credit available, high intensity of capital controls, less financially developed markets, and high cost
of capital, but has disappeared in financially developed countries. These results suggest that once a country advances to a certain degree of financial and economic development, it becomes more efficient in allocating resources within the country, and financial constraints at the individual firm level become less binding. We also find that access to external equity finance is a possible channel through which financial development affects the sensitivity of investment to internal cash flow.
Keywords: Investments, Cash flow, Financing constraints; Financial development, Equity Finance
JEL Classification: G31, G32
학회소식
[2016년 제 4차] Has Investment-Cash Flow Sensitivity Disappeared Across Countries
작성자 : 관리자
조회수 : 853
게시일 :
2016-12-21
