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

Author

Listed:
  • Saddiqa

    (Pakistan Institute of Development Economics, Islamabad)

  • Ayaz ul Haq

    (IQRA University, Islamabad)

Abstract

This paper investigates the sensitivity of corporate cash holdings to cash inflows (CFSC). The study also aims to investigate the differential effects of CFSC across financially-constrained and unconstrained-firms and across firms having high and low- Tobin’s Q. The study uses GMM model on unbalanced firm-level data of all manufacturing firms listed at the Pakistan Stock Exchange over the period 2000-2014. The results show that financially-constrained firms are more likely to hold extra cash out of their cash inflows than their unconstrained counterparts. Further, the sensitivity of cash holdings to cash inflows is more in growing firms than other firms.

Suggested Citation

  • Saddiqa & Ayaz ul Haq, 2017. "Firm Characteristics and Cash-Cash Flow Sensitivity of the Manufacturing Sector of Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(3), pages 71-103, September.
    • Handle: RePEc:bec:imsber:v:9:y:2017:i:3:p:71-103
    DOI: dx.doi.org/10.22547/BER/9.3.3
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    References listed on IDEAS

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    More about this item

    Keywords

    Cash flow sensitivity; Cash; Tobin’s Q; Constrained firms; GMM;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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