Investment-Cash Flow Sensitivity Cannot Be a Good Measure of Financial Constraints: Evidence from the Time Series

By Huafeng Chen, Shaojun Chen. 2012

316 citations recorded by the source corpus.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/8a06f9c6d873e0b32a4b240265298bc133a5df16

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Citations in the corpus

Restraining Overconfident CEOs through Improved Governance: Evidence from the Sarbanes-Oxley Act (2015, unknown): “However, we do not use the model to measure financial constraints (see e.g., Chen and Chen (2012); Kaplan and Zingales (1997)).”
Treating Measurement Error in Tobin’s Q (2011, unknown): “This result is consistent with the tendency for cash flow coefficients to have decreased over time, documented in Chen and Chen (2011). Also consistent with the results in Chen and Chen (2011) is our finding that only a few of the underlying yearly EW estimates are significant.”
Intangible Capital and the Investment-q Relation (2017, background): “Like us, Chen and Chen (2012) find a weaker investment-cash flow sensitivity in recent years.”
R&D sensitivity to asset sale proceeds: New evidence on financing constraints and intangible investment (2013, methodology): “Specifically, our primary tests are based on the sensitivity of firm investment in intangible capital (research and 1 For example, see Kaplan and Zingales (1997), Erickson and Whited (2000), Alti (2003), Moyen (2004), and Chen and Chen (2011).”
The value of financial flexibility and corporate financial policy (2014, background): “This, for instance, may explain the low explanatory power of investment-cash flow sensitivity during the recent financial crisis (e.g., Chen and Chen, 2012).”
The effect of firm size on the leverage–performance relationship during the financial crisis of 2007–2009 (2015, unknown): “Prior studies, such as Denis and Sibilkov (2010), Li (2011), and Chen and Chen (2012), show that financial constraints affect investment (e.g., capital expenditure and/or R&D investment).”
Investment and the Weighted Average Cost of Capital (2016, unknown): “Consistent with the work of Chen and Chen (2012), the magnitude of the cash flow term declines between the 1970s and the 2000s.”
Policy Uncertainty and Corporate Investment (2015, unknown): “For example, Chen and Chen (2012) find that operating cash flows were a stronger predictor of investment only until about 1980–1985.”
Social Capital, Investments and External Financing (2015, unknown): “To be consistent with prior research (e.g., Almeida et al. 2004; Chen et al. 2007; Chen and Chen, 2012) we exclude firms with asset or sales growth exceeding 100% to avoid potential business discontinuities caused by mergers and acquisitions, and require that the firm’s capital, book assets, and…”
Policy uncertainty, investment, and the cost of capital (2018, unknown): “…result is not surprising given that investment–cash flow sensitivities are well documented (Fazzari et al., 1988; Kaplan and Zingales, 1997; Chen and Chen, 2012; Lewellen and Lewellen, 2016; among others), and cash flow likely captures part of marginal q in the absence of additional control…”