AffiliationUniversity of Northampton
University of Bristol
University of Derby
Manchester Metropolitan University
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AbstractUsing publicly listed firms in the UK, we examine the time-series variation of investment-cash flow sensitivity after directly controlling for future growth opportunities in cash flow, which if overlooked, as in the literature, could bias inferences. We find that investment-cash flow sensitivity is disappearing over time, even for constrained firms during the global financial crisis when credit constraints were more significant or binding. Our results not only confirm the decline in investment-cash flow sensitivity that is not explained by factors so far identified in the literature but also its diminishing usefulness as a proxy of financial constraints.
CitationMachokoto, M., Tanveer, U., Ishaq, S. and Areneke, G., (2019). 'Decreasing investment-cash flow sensitivity: Further UK evidence'. Finance Research Letters, pp. 1-8. DOI: 10.1016/j.frl.2019.101397
JournalFinance Research Letters