Investment-Cash Flow Sensitivity under Financial Constraints Case of Tunisia

Abstract

<p class="MsoNormal" style="margin: 0cm 0cm 4pt; text-align: justify; text-justify: inter-ideograph;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;"><span style="mso-ansi-language: EN-US;" lang="EN-US">Is investment cash flow sensitivity an adequate measure of a firm’s financial constraints? The answer to this<br />question is an unresolved puzzle. This paper theoretically and empirically examines investment cash flow<br />sensitivity and its ability to measure a firm's financial constraints. The empirical study focuses on an unbalanced<br />panel of 88 Tunisian firms observed over the 1997 to 2007 period.</span></span></span></p

Financial Distress of Companies and Cash Flow-Investment-Sensitivity: Evidence From Panel of Non-Financial Firms

“…In Column 3 of Table 3, the coefficient of cash flow for NON-DIVIDEND PAYERS category is significant while for DIVIDEND PAYERS category it is insignificant giving proof that dividend-paying firms have investments less sensitive to their cash flows as compared to firms that do not pay dividends. These results are in line with a large portion of literature that claims that dividend policy of a firm is a valid indicator of financial constraints on investment (Chang et al, 2007, Cleary, 1999, FAZZARI and PETERSEN, 1988, Hovakimian, 2009, Marouene and Abaoub, 2013.…”

“…In addition to cash flow and dividend policy, firm size and age have been used extensively in literature as the measures of financing constraints. Size is a good measure of financial constraints because large firms can easily raise their debt when needed as they are more diversified and faces lesser bankruptcy risks however, smaller firms has to face higher transaction costs and adverse selection problems (Marouene and Abaoub, 2013). Similarly, younger firms also face problems of higher information asymmetries which increase their risk when raising external funds (Beck et al, 2006).…”

Efek Kondisi Finansial, Struktur Utang, Dan Cash Holding Pada Sensitivitas Arus Kas Investasi

“…Kondisi keuangan memiliki dua kategori, pertama perusahaan yang terkendala dan yang tidak terkendala. Malelak (2018) dan Tastan (2020) memiliki hasil temuan bahwa ICFS terdapat pada perusahaan yang dibatasi secara finansial atau perusahaan yang terkendala.…”