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Is the cash flow sensitivity of cash asymmetric? African evidence

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  • Machokoto, Michael
  • Areneke, Geofry

Abstract

We examine whether the cash flow sensitivity of cash is asymmetric using a sample of 745 firms from understudied African countries over the period from 2000–2015. We hypothesise and find significant asymmetry in the cash flow sensitivity of cash conditional on cash flow and financial constraints. Firms with positive cash flow save while those with negative cash flow dissave. These differences are more apparent in the presence of financial constraints. Our results affirm the asymmetry in the cash flow sensitivity of cash and highlight the severity of the impact of financial constraints on corporate decisions in emerging markets.

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  • Machokoto, Michael & Areneke, Geofry, 2021. "Is the cash flow sensitivity of cash asymmetric? African evidence," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319301035
    DOI: 10.1016/j.frl.2020.101440
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    Cited by:

    1. Michael Machokoto, 2021. "Do financial constraints really matter? A case of understudied African firms," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4670-4705, July.
    2. Lee, Chien-Chiang & Wang, Chih-Wei & Thinh, Bui Tien, 2023. "Green development, climate risks, and cash flow: International evidence," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Asymmetry; Financial constraints; The cash flow sensitivity of cash;
    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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