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Global cash flow sensitivities

Author

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  • Döring, Simon
  • Drobetz, Wolfgang
  • Janzen, Malte
  • Meier, Iwan

Abstract

We examine the role of a country's institutional framework for investment and financing activities. A country's financial structure, investor rights, and legal environment are important determinants of the relation between cash flow and firms’ investment and financing behavior. Firms from countries with a stronger institutional framework exhibit higher financing-cash flow sensitivities. These firms are more likely to substitute a cash flow shortfall with issuing equity. Conversely, investment-cash flow sensitivities are higher for firms in countries with a weaker institutional framework.

Suggested Citation

  • Döring, Simon & Drobetz, Wolfgang & Janzen, Malte & Meier, Iwan, 2018. "Global cash flow sensitivities," Finance Research Letters, Elsevier, vol. 25(C), pages 16-22.
    • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:16-22
    DOI: 10.1016/j.frl.2017.09.022
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    More about this item

    Keywords

    Cash flow sensitivity; Financial development; Law and finance;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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