Investment Cash Flow Sensitivity: The Role of Cash Flow Volatility

2014 ◽  
Author(s):  
Klaas Mulier ◽  
Koen J. L. Schoors ◽  
Bruno Merlevede
Keyword(s):  
Cash Flow ◽  
Flow Sensitivity ◽  
Cash Flow Sensitivity ◽  
Cash Flow Volatility

CSR, agency costs and investment-cash flow sensitivity: a mediated moderation analysis

2017 ◽  
Vol 43 (3) ◽  
pp. 299-312 ◽  
Author(s):  
Marwa Samet ◽  
Anis Jarboui
Keyword(s):  
Cash Flow ◽  
Agency Costs ◽  
Data Set ◽  
Content Type ◽  
Mediated Moderation ◽  
Flow Sensitivity ◽  
Cash Flow Sensitivity ◽  
Internal Funds ◽  
Investment Spending

Purpose The purpose of this paper is to document the relation between investment-cash flow sensitivity and a firm’s engagement in corporate social responsibility (CSR) activities in European context. Specifically, this paper aims to empirically examine how CSR moderates the sensitivity between investment spending and firm internal funds. Design/methodology/approach The Euler equation technique approach is applied to test the sensitivity of investment to internally generated funds for a panel data set of 398 European companies listed in the STOXX Europe 600 during 2009-2014. Furthermore, a mediated moderation model is developed in order to examine the moderating role of CSR in the investment-cash flow sensitivity, as well as the mediating role of agency costs on the moderation effect of CSR. Findings The results show that CSR performance weakens the sensitivity of investment to internal funds; agency costs of free cash flow mediate the negative moderating effect of CSR on investment-cash flow sensitivity. Thus, this study demonstrates empirically that firms with socially responsible practices are better positioned to obtain financing in the capital markets through reducing market frictions as well as agency costs. Practical implications Firms are invited to engage more in CSR activities that reduce agency conflicts between management and shareholders. Originality/value The originality of this paper consists in proposing the establishment of both direct and indirect link between CSR and investment-cash flow sensitivity.

scholarly journals BNDES loans and the financial constraints of Brazilian publicly traded companies

2020 ◽  
Vol 55 (4) ◽  
pp. 567-582
Author(s):  
Walter Eclache da Silva ◽  
Eduardo Kayo ◽  
Roy Martelanc
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Financial Constraints ◽  
Theoretical Perspective ◽  
Content Type ◽  
Flow Sensitivity ◽  
Multiplier Effect ◽  
Cash Flow Sensitivity ◽  
Development Banks

Purpose The purpose of this paper is to analyze whether companies that contracted loans from the Brazilian National Bank for Economic and Social Development (BNDES) between 2002 and 2014 were able to invest more than companies that did not. The literature on financial constraints, particularly that based on the investment-cash flow sensitivity model, is among the most studied and controversial in the area of finance, and the discussion on the role of development banks is equally controversial. Design/methodology/approach The main econometric model of this study was based on the investment-cash flow sensitivity model, with the incorporation of a binary variable that captures the role of the BNDES. This model is applied to a sample of companies listed on the B3 from 2002 to 2014. Findings This study shows that loans from the BNDES amplify the effects of cash flow on investments, generating a kind of credit multiplier. An important role of development banks is to reduce the financial constraints typical of developing countries. Research limitations/implications The use of the cash flow sensitivity model in companies that contracted loans from the BNDES is a relevant instrument to test the effect of the BNDES on companies with financial constraints. Practical implications The contracting of BNDES loans by companies can affect both capital structure and cash generation, particularly in companies or years in which there was financial constraint. Social implications Due to the nature of the BNDES as a development bank, there are ramifications in terms of the generation of employment and income inherent to the mission of this type of institution. Knowing the multiplier effect on the cash flow potential of companies has a direct impact on their preservation, enabling them to maintain and expand the supply of jobs. Originality/value This study is the first to integrate two important areas of study. From the theoretical perspective, this study provides evidence on the relationship between the BNDES and company financial constraints that open new avenues of research. From the managerial point of view, the evidence of the multiplier effect is highly important for the management of the capital structure and cash flow of companies.

Why Did the Investment–Cash Flow Sensitivity Decline over Time?

2020 ◽  
pp. 1-37
Author(s):  
Zhen Wang ◽  
Chu Zhang
Keyword(s):  
Cash Flow ◽  
New Economy ◽  
Corporate Investment ◽  
Flow Sensitivity ◽  
Capital Productivity ◽  
Cash Flow Sensitivity ◽  
Old Economy ◽  
Over Time ◽  
Empirical Analyses

Abstract We propose an explanation for why corporate investment used to be sensitive to cash flow and why the sensitivity declined over time. The sensitivity stems from the informational role of cash flow in inferring the productivity of tangible capital in the old economy. Over time, however, more new-economy firms enter the market. These firms have reduced tangible capital productivity and reduced cash-flow predictability, which drives the decline in the average investment–cash flow sensitivity. Theoretical and empirical analyses support this explanation.

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