Financial constraints and cash–cash flow sensitivity

Firm Characteristics and Cash-Cash Flow Sensitivity of the Manufacturing Sector of Pakistan

“…Abundant studies in the literature have used a number of different estimation methods to measure firm diverse characteristics on the CFSC of manufacturing firms such as, D'Espallier et al, (2008), Silva and Carreira (2010), López-Gracia and Sogorb-Mira (2015), Pál and Ferrando (2010) have used GMM estimator for their analysis. This study also used the two-step system-GMM technique.…”

“…As a result they will able to mitigate their financial shortfalls in near future. In the different studies, it has seen in the literature that researchers have framed the similar approach in their empirical frame work (Almeida et al, 2004;Cagalayan & Rahid, 2014;López-Gracia & Sogorb-Mira, 2015).…”

“…Supporting this view, a number of studies show that financiallyconstrained firms hold more cash in their reserves, while financiallyunconstrained firms do not follow any systematic approach to hold cash for unforeseen events. Almeida et al (2004) and López-Gracia and Sogorb-Mira (2015) provide evidence that financially-constrained and unconstrained firms use different policies because constrained firms face problems to access capital through external sources and thus they save more cash, while financially-unconstrained firms do not.…”

“…Over the last few decades, many researchers have conducted research on empirical cash holdings and its determinants (Opler, Pinkowitz, Stulz & Williamson, 1999;Saddour, 2006;Ferrerira & Vilela, 2004), valuation of liquid assets (Denis & Sibilkov, 2009;Pinkowitz & Williamson, 2006;Faulkender & Wang, 2006;Shah & Shah, 2016), cash holding and financial constraints, cash flow and investment sensitivity (Fazzari, Hubbard, Petersen, Blinder, & Poterba, 1988;D'Espallier, Vandemaele & Peeters, 2008) and finally, CFSC (Almeida, Campello & Weisbach, 2004;López-Gracia & Sogorb-Mira, 2015).…”

“…In various empirical studies like, Harris and Raviv (1990), Opler et al (1999), López-Gracia and Sogorb-Mira (2015), Shleifer and Vishny (1992), and Ferreira and Vilela (2004) this association between growth opportunities and reserved cash level has explored. For instance, Myers and Majluf (1984) also indicate that those firms whose value is largely determined by their expected growth prospects have larger information asymmetry.…”