This paper examines the effects of costly external financing on the optimal timing of a firm’s investment. By altering the optimal investment timing, costly financing affects current investment and the sensitivity of investment to internal cash flow. Importantly, the relation between the cost of external funds and investment-cash flow sensitivity is non-monotonic. Investment-cash flow sensitivi...

We examine the role of country-level legal investor protection (i.e., shareholder and creditor protection) on firm investment–cash flow sensitivity (ICFS). Using underexplored research data across 21 countries working with a conservative empirical design, we extend prior literature relation between ICFS provide new evidence how these attributes interact to explain firm's ICFS. find that either ...

Results: The analysis finds that cash flow sensitivity is a valid measure of financial constraints in the Indian manufacturing sector. Results according to splitting criteria found that investment decisions of standalone firms are more sensitive to cash flow than group affiliated firms. Further, splitting the firms according to market capitalization and tangible net worth reveals a higher degre...

This paper examines the sensitivity of investment to cash flow in declining economic conditions, focusing on impact a firm’s reliance bank debt. Using context Jordan, developing Middle East and North Africa (MENA) country, study utilizes standard Q theory augmented by flow, leverage, liquidity. Then, it allows for differential loading coefficient pre- post-2008, year that marks beginning catego...

Using both multivariate regressions, simultaneous nonlinear equations and a discrete time hazard model, I find that the level of CSR in a firm is a significant determinant of distress, even after controlling for previously identified drivers of firm distress. The relationship is robust to the endogeneity of CSR investments and free cash flow and suggests that there is informational value in ext...

Constant pressure to increase return on assets has firms seeking ways to reduce their working capital costs. In the cash management area, firms are employing more sophisticated collection and disbursement systems. Cash management systems today efficiently speed up collections and, at the end of the day, sweep excess balances into money market accounts. Cash managers focus on finding the optimal...