IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v55y2023ipbs1544612323003148.html
   My bibliography  Save this article

Corporate governance, information disclosure and investment - Cash flow sensitivity

Author

Listed:
  • Yi, Er

Abstract

We investigate the impact of cash flow on investment spending under the scenarios of underinvestment and overinvestment and the moderating effect of corporate governance and information disclosure on the sensitivity of both. The empirical analysis is conducted by selecting listed companies in the manufacturing sector from 2013 to 2020. We find that companies investment is highly sensitive to cash flow under financing constraints and overinvestment due to agency costs. In the case of overinvestment, improving the level of disclosure significantly mitigates investment-cash flow sensitivity; in the case of underinvestment, improving corporate governance significantly reduces investment-cash flow sensitivity.

Suggested Citation

  • Yi, Er, 2023. "Corporate governance, information disclosure and investment - Cash flow sensitivity," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003148
    DOI: 10.1016/j.frl.2023.103942
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323003148
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.103942?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ghoul, Sadok El & Karoui, Aymen, 2021. "What's in a (Green) Name? The Consequences of Greening Fund Names on Fund Flows, Turnover, and Performance," Finance Research Letters, Elsevier, vol. 39(C).
    2. Machokoto, Michael & Tanveer, Umair & Ishaq, Shamaila & Areneke, Geofry, 2021. "Decreasing investment-cash flow sensitivity: Further UK evidence," Finance Research Letters, Elsevier, vol. 38(C).
    3. Tran, Quoc Trung, 2020. "Monetary loosening and cash holdings: Evidence from an emerging market," Finance Research Letters, Elsevier, vol. 36(C).
    4. Tran, Quoc Trung, 2020. "Corruption and corporate cash holdings: international evidence," Journal of Multinational Financial Management, Elsevier, vol. 54(C).
    5. Parul Bhardwaj & Abhishek Kumar, 2020. "Determinants of firm-level investment in India: does size matter?," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 13(2), pages 140-160, May.
    6. French, Joseph J. & Li, Wei-Xuan, 2022. "Economic policy uncertainty and fund flows to the United States," Finance Research Letters, Elsevier, vol. 45(C).
    7. Beladi, Hamid & Deng, Jie & Hu, May, 2021. "Cash flow uncertainty, financial constraints and R&D investment," International Review of Financial Analysis, Elsevier, vol. 76(C).
    8. Elzbieta Bukalska, 2020. "Are companies managed by overconfident CEO financially constraint? Investment–cash flow sensitivity approach," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 15(1), pages 107-131, March.
    9. Fuxiu Jiang & Kenneth A. Kim & Yunbiao Ma & John R. Nofsinger & Beibei Shi, 2019. "Corporate Culture and Investment–Cash Flow Sensitivity," Journal of Business Ethics, Springer, vol. 154(2), pages 425-439, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhou, Weihua & Li, Yuanjie & Wang, Deli & Xueqin, Du & Ke, Yishun, 2024. "Management's tone in MD&A disclosure and investment efficiency: Evidence from China," Finance Research Letters, Elsevier, vol. 59(C).
    2. Zhou, Bole & Ma, Lili & Yang, Shenghao, 2024. "Catering behaviors in corporate digitization disclosures: Identification and analyst forecast accuracy loss," Research in International Business and Finance, Elsevier, vol. 68(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cheraghali, Hamid & Igeh, Sofia Aarstad & Lin, Kuan-Heng & Molnár, Peter & Wijerathne, Iddamalgodage, 2022. "Online attention and mutual fund performance: Evidence from Norway," Finance Research Letters, Elsevier, vol. 49(C).
    2. Tan, Xiujie & Yan, Yaxue & Dong, Yuyang, 2022. "Peer effect in green credit induced green innovation: An empirical study from China's Green Credit Guidelines," Resources Policy, Elsevier, vol. 76(C).
    3. Mahmoud Otaify & Aly Dawood & Mohamed Farouk, 2022. "Optimal Cash Ratio and Adjustment Speed Across Different Firm Characteristics," International Journal of Economics and Financial Issues, Econjournals, vol. 12(3), pages 73-85, May.
    4. Tahir, Muhammad & Ibrahim, Haslindar & Zulkafli, Abdul Hadi & Mushtaq, Muhammad, 2020. "Corruption, national culture, law and dividend repatriation policy," Journal of Multinational Financial Management, Elsevier, vol. 57.
    5. Beladi, Hamid & Hu, May & Li, Silei & Yang, JingJing, 2022. "Dual-class share structure on the dividend payout policy: Evidence from China Concepts Stocks," International Review of Financial Analysis, Elsevier, vol. 82(C).
    6. Li, Guangzi & Chan, Kam C., 2021. "Anti-corruption intensity and loan contracting: Evidence from non-state owned firms in China," Emerging Markets Review, Elsevier, vol. 49(C).
    7. Chen, Yang & Yang, Shengping & Li, Quan, 2022. "How does the development of digital financial inclusion affect the total factor productivity of listed companies? Evidence from China," Finance Research Letters, Elsevier, vol. 47(PB).
    8. Inaba, Kei-Ichiro, 2021. "Corporate cash and governance: A global look into publicly-traded companies' aggregate cash ratios," International Review of Financial Analysis, Elsevier, vol. 78(C).
    9. Chao Li & Mian Wu & Wenli Huang, 2023. "Environmental, Social, and Governance Performance and Enterprise Dynamic Financial Behavior: Evidence from Panel Vector Autoregression," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(2), pages 281-295, January.
    10. K Shiljas & Dilip Kumar, 2024. "The interplay of cash flow uncertainty and firm life cycle on sustainability disclosure," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 8471-8492, December.
    11. Shao, Yanmin & Xu, Kunliang & Shan, Yuan George, 2024. "Leveraging corporate digitalization for green technology innovation: The mediating role of resource endowments," Technovation, Elsevier, vol. 133(C).
    12. Choi, Sangyup & Havel, Jiri, 2025. "Geopolitical risk and U.S. foreign portfolio investment: A tale of advanced and emerging markets," Journal of International Money and Finance, Elsevier, vol. 151(C).
    13. Martin Hodula & Jan Janku & Simona Malovana & Ngoc Anh Ngo, 2024. "Geopolitical Risks and Their Impact on Global Macro-Financial Stability: Literature and Measurements," Working Papers 2024/8, Czech National Bank.
    14. Wang, Fan & Pan, Changchun & Wang, Weiqiang, 2023. "Impact of US monetary policy uncertainty on RMB exchange rate volatility:The role of international capital flows," Finance Research Letters, Elsevier, vol. 58(PC).
    15. Wen, Huwei & Zhong, Qiming & Lee, Chien-Chiang, 2022. "Digitalization, competition strategy and corporate innovation: Evidence from Chinese manufacturing listed companies," International Review of Financial Analysis, Elsevier, vol. 82(C).
    16. Zhou, Chao & Liao, Jinglin, 2024. "Home country digital finance development and post-entry internationalization speed of emerging market SMEs: Empirical evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    17. Chada, Swechha, 2023. "Economic policy uncertainties and institutional ownership in India," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    18. Thi Nguyen, Loan Quynh & Matousek, Roman & Muradoglu, Gulnur, 2024. "Bank capital, liquidity creation and the moderating role of bank culture: An investigation using a machine learning approach," Journal of Financial Stability, Elsevier, vol. 72(C).
    19. Yurou Liu & Jinyang Liu, 2024. "Social Integrity and Stock Price Crash Risk," Journal of Business Ethics, Springer, vol. 190(3), pages 703-721, March.
    20. Zhenzhen Chen & Yu He & Yum K. Kwan, 2024. "The High-tech Enterprise Certification Policy and Innovation: Quantity or Quality?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14135-14171, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003148. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.