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Investment Cash Flow Sensitivity and Effect of Managers' Ownership: Difference between Central Owned and Private Owned Companies in China

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  • Yuanyao Ding

    (Department of Economics, Business School of Ningbo University Ningbo 315211, China)

  • Xu Qian

    (Department of Finance, Business School of Ningbo University Ningbo 315211, China)

Abstract

Based on panel data of the listed companies in China's stock market A during a period of year 2007 - 2010, we made an empirical study on what drives the investment cash flow sensitivity and theeffect of management's ownership and boththeir differences between the central stateowned companiesand then on-stateowned companiesas well.The sensitivity of investment to internal cash flow in China'scentralstate-owned companies can be explained by hypothesis of free cash flow It is the cost of agency that causes over-investment behaviors ,and the management's ownership appears significant enhancement effect rather thanentrenchment effect. However,the sensitivity of investment to internal cash flow in China's non-state owned companies supports the explanation of hypothesis of financial constraints .A symmetrical information causesunder- investment behaviors of the firms.In the mean while,the entrenchment effect of manages' ownership dominates the enhancement effect in non-state owned companies

Suggested Citation

  • Yuanyao Ding & Xu Qian, 2014. "Investment Cash Flow Sensitivity and Effect of Managers' Ownership: Difference between Central Owned and Private Owned Companies in China," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 449-456.
    • Handle: RePEc:eco:journ1:2014-03-1
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    Cited by:

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    2. Moez EL Gaied, 2018. "Investment-Cash Flow Sensitivity and Growth Opportunities," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 154-160.

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    More about this item

    Keywords

    Internal Cash Flow; External FinancialConstraints; Entrenchment Effect.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • 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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