Investment-Cash Flow Sensitivities Are Not Valid Measures of Financing Constraints

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How researchers see this paper

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The determinants of financing obstacles (2004, neutral): “Kaplan and Zingales (1997, 2000) question the validity of this interpretation.”
Real Investment Implications of Employee Stock Option Exercises (2002, positive): “Additionally, Kothari and Sloan [1992] find that current prices are a positive predictor of future earnings.”
Firm Entry and Employment Dynamics in the Great Recession (2014, neutral): “Recent contributions to the heterogeneous firm and financial constraint literature include, Khan and Thomas (2010), Gilchrist, Sim and Zakraj́sek (2010), and Arellano, Bai and Kehoe (2012). These contributions succeed at generating the initial large decline in output during the Great Recession.”
Firm Size and Monetary Policy Transmission: Evidence from German Business Survey Data (2004, positive): “However, Kaplan and Zingales (1997) and Kaplan and Zingales (2000) argue that such investment-cash flow sensitivities do not provide useful measures of financing constraints.”
Financial Reporting Quality, Private Information, Monitoring and the Lease-Versus-Buy Decision (2010, neutral): “…many studies conclude that information asymmetry and financing constraints decrease investment efficiency, some argue that it is inappropriate to use investment-cash flow sensitivity to proxy for investment efficiency (e.g., Kaplan and Zingales, 1997, 2000, and Bushman, Smith and Zhang, 2007).”